With the political defeats suffered by the government in parliament along with its conflicts with the provincial governors, a turning point has been reached in the stage inaugurated by the assumption of Javier Milei to the Argentine Presidency.
Since that moment, times have taken on a dizzying dynamic. The temporality of the crisis has opened a period of urgencies. Those of government to advance its programme as quickly as possible and those of working people to put limits on that programme and ensure it fails.
Given the disruptive personality of the President of the Nation, it is not surprising that he seeks to emerge from above1 from this labyrinth, created by his own actions and words. This is not putting his foot on the brake but accelerating. This is what he has just made clear with his intervention at the opening of the ordinary sessions of the National Congress last Friday.
Sorting the Board
Both at the Political Action Conference in Washington and at the World Economic Forum in Davos, the President presented his political-economic project that has fiscal balance as the cornerstone of his proposal, the deification of the market as a measure of value of all values and private property as the right that is above all rights, in theoretical terms, while revaluing the role of monopolies and reducing the State to its minimum expression. What he did in his recent intervention in Congress was to bring these (his) founding concepts down to earth.
It was a computer-fed speech – read on a carefully prepared stage – with a strong class content and a profoundly dehumanised triumphalist spirit with which he regained the initiative, regained centrality and, as he has been doing since the electoral campaign, it set the political agenda in the country.
Political construction
As we have pointed out in previous notes, the “Milei experiment”, since it is the first time that a “liberal anarchist” has assumed the presidency of a country, is followed closely by all the right-wing parties in the world. Another issue has now been added to this: its method of political construction, when it has minimal parliamentary representation, no territorial power and weak party structure. The “it is non-negotiable” is not only referring to the zero fiscal deficit, the chainsaw or the blender, it has also been installed on the political level. The president feels himself the bearer of a set of conceptions (his truths) that are non- negotiable; he exercises a kind of religious-messianism that shows him as a chosen one who entrusts himself to “the forces of heaven.” Thus, there is no possible transaction as everything is either accepted or rejected in total.
The way found to consolidate and expand its “hard core” is none other than to continue in the construction of an enemy (a very wide range that goes from caste to radicalism, passing through unionists, social leaders, cultural figures or what passes for such). All the while he is making it increasingly clear that his project implies a radical (because profound) transformation of the socio-political structure of the country.
This is indicated by the 10 points that he proposed as a Founding Pact (reminiscent of the Washington Consensus of the 1990s) to the governors - it would be signed on May 25 - conditional on their approval of the omnibus law and the fiscal package. In return he would enable the transfer of reduced funds to the provinces2. Any extortionate image is not a simple coincidence. This would all be presided over by a new type of leadership and the prefiguration of a system of power qualitatively different from that known until now.
Can it work?
The zero deficit is “non- negotiable,” Milei repeats over and over again whilst he celebrating the achievement of a financial surplus in January (after paying interest). He also celebrated the Central Bank continuing to buy dollars, that it liquefied remunerated liabilities, that financial exchange rates fell and that the exchange gap was narrowed.
These achievements result from the application of an extreme shock policy with three objectives: to reduce monetary emission to zero, to achieve a new balance of the relative prices of the economy (exchange rate, rates, prices, salaries) and to improve the balance of the Central bank.
In this context, the idea that the shock programme “works better than expected” begins to grow. They expect a strong recession in the first quarter, with a drop in demand and expectation of a lower inflation rate in February/March (15-17%). They also expect the start of a recovery late in the second quarter thanks to the dollar income from the harvest. The result would be an estimated annual decline ranging from -2.6 to -4.4% of GDP. There would then be a prior arrangement to lift exchange controls and unify exchange rates in the middle of the year. Dollarisation would then be within reach.
Early celebrations?
Faced with this optimistic vision, it is valid to ask: is the adjustment sustainable over time since the blender/chainsaw cannot operate permanently? In the face of rising prices, can this economy be achieved without a new devaluation or at least without increasing the percentage of daily devaluation?Won't the fall in demand also drag down tax revenues, necessitating a second adjustment shock? Although the Central Bank is buying dollars, the reserves are still negative, so how can we add no less than the 20,000 million necessary to dollarise? For some reason Milei clarified that “his” dollarisation would actually be a regime of “currency competition”, a kind of convertibility. However, he still agitates for dollarisation because it gives him returns among his voters.
Conditional supports
The IMF and the US generally support the programme but demand laws to consolidate it and take into account the most disadvantaged. They also support the ruling class bloc -- they see the historical opportunity to impose a lasting relationship of forces in favour of capital -- but they worry about whether the recession could turn into depression or that a dispute begins between dollarisers vs. devaluators. Also, who will exercise hegemony in the leadership of the power bloc, today totally in the hands of financial capital. In his speech to Congress Milei did not make a single reference to internal trade or industry.
Governance in question
Both of them put the emphasis on how to guarantee governability, when they see that social reactions are growing and that new actors are taking to the streets (cultural movements, the reappearance of neighborhood assemblies, numerous sectoral strikes) preceded and driven by intense activity of the partisan left. In less than three months, there has been a sharp drop in the purchasing power of popular incomes, a strong impact on domestic demand and a drop in activity, a drop in the use of installed capacity in the private sector and the beginning of suspensions and layoffs. Everything is summarised in the impressive jump in poverty and indigence levels (57.4 and 14.2 respectively) that would be surpassed in February/March. Many see risks of social disintegration.
Times are moving quickly both for the government, which needs to reach the middle of the year showing successes before social reaction becomes widespread, and for the working people, who need to quickly link all forms of resistance to move towards a future different from the looming social barbarism.
3/03/2024
- 1“You come out of labyrinths at the top,” is a metaphor coined by the novelist Leopoldo Marechal that refers to the unknown to resolve a conflict. For the RAE, the labyrinth “is a confusing and tangled thing.”
- 2In its attack on public spending in order to reach zero fiscal deficit, the government also cut funds to the provinces, especially Chubut, one of the oil-producing provinces, which led its governor to threaten to close the valve that allows the flow of gas and oil to the rest of the country, to which other provinces joined. A political crisis with an unpredictable ending, which for the moment shut down the justice system that ordered the national government to replace the cut funds.