Doug Henwood wrote:
> Bradford DeLong wrote:
>
> >It's not the IMF or the World Bank that has raised Argentina's
> >government debt/GDP ratio from 30% in 1994 to 54% today. It's not
> >the IMF that continues to announce, daily, that Argentina must
> >maintain its currency board and maintain its parity with the dollar,
> >thus overvaluing its currency and strangling its own exports.
> >
> >I have yet to find anyone who can explain to me just how Argentina's
> >situation would be improved if the IMF and the World Bank were to
> >vanish tonight...
>
> Well, just because some analysts & activists focus obsessively on the
> WB/IMF to the exclusion of everything else doesn't mean that
> Argentina isn't in a near-impossible international situation.
> Cavallo's currency arrangement was proposed as a solution to
> hyperinflation, and orthodox thinkers and investors loved it at
> first. But why does hyperinflation happen? Sometimes because of war
> or natural disaster, but also because of extreme demands being made
> on a national treasury - to maintain a quarter-decent level of social
> spending at the same time debts must be serviced. Cavallo imposed his
> currency board as a magic bullet, and there's a boom for a while as
> capital flows in and the investing class feels happy - but there's no
> way Argentina can survive in export markets with a currency fixed to
> the dollar, given that its productivity growth can't match that of
> the U.S. So the country goes into a four-year depression. But the
> currency can't be devalued, and the system can't be renounced,
> because the investing classes wouldn't like that, and capital would
> flee. There's no way out of this box, is there?
>
> The only countries that have closed some of the income gap with the
> First World were those in Asia that violated all the canons of
> IMF/neoliberal orthodoxy - and they hit a wall in 1997, with the
> exception of China, which is hardly an example that Argentina (or
> Kenya) can follow. The IMF is only partly responsible for this, but
> if you treat it as a synecdoche rather than the sole actor, it's not
> a bad target.
>
> Doug