>>García remains in the lead despite the abysmal reputation he acquired
>>for the massive inflation that his policies prompted during his
>>presidency between 1985 and 1990, and the humiliating circumstance of
>>his having to flee the country after criminal charges (which were
>>later dropped) had been lodged against him.
>
>was it all García's fault? hyperinflation usually doesn't result from
>goverment or central bank mistakes as much as from civil wars, civil
>unrest, and the like, which make it hard for a government to collect
>taxes or to cut expenditures -- so that they are _forced_ to "run the
>printing presses," causing hyperinflation. Garcia was trying to deal
>with Sendero Luminoso and other social conflicts, no? isn't that what
>caused the hyperinflation?
>
>I can imagine that he made a lot of mistakes, but that's common when
>it's hard to keep political alliances together.
>
>Here's what the Wikipedia has to say:
...........
Jim makes a good point, we mustn't "personalize" effects that are caused by larger social forces.
But Garcia's economic policy management was unusually erratic and self-centered. He played a bad hand badly -- and for personal and opportunistic reasons (opportunism is a word that comes up often with APRA, even among those who like to avoid trite phrases). Garcia should have been blamed for only the "additional" suffering he caused, but wound up being blamed for it all (plus the blame he received for helping to escalate the military conflict/human rights violations and his personal/party corruption).
If you had bet $10 on Garcia making a comeback the odds would make you a rich man today. It shows how flimsy Peruvian politics has become.
[ A brief timeline of Garcia's role in the collapse
- 1985 Garcia/APRA comes into office 3 years into the Latin America debt crisis with Peru in a deep depression. By this time all the major Latin countries had surrendered to the IMF, so he knew he had no allied countries and would have to play carefully. In addition several neighboring countries have gone through stabilization crises. The pathways are well known: capital flight, bank "coordination", etc.
Garcia positions himself as confronting international finance (limits debt payments to 10% of exports, breaks with the IMF, etc) BUT accommodating national capital (including through interventionist price and exchange controls). Presidential economic advisors come Lat Am Structuralist School (on loan from ILO, EEC). For 2 years this appears to work (by coincidence or design) : the GDP grows (from a low base), foreign exchange reserves grow, etc.
- 1987 Garcia breaks with his Prime Minister/Finance Minister, Luis Alva Castro who is a party rival. In order to rally the party base against Castro, Garcia suddenly announces an abrupt swerve to the left -- now he will confront national capital. No one has been consulted or involved in preparing the new programme (neither ministers nor economic advisors or parliament, never mind the public). The programme mostly involves rhetoric and "splash" rather than seriously transformational moves but, of course provokes the usual massive capital flight, bank boycott etc that had been seen in all the neighboring countries. The programme has no plan to deal with this, by then, well known phenomena. Hyperinflation begins.
- 1988 After a year of profound economic crisis and equivocation Garcia announces his new direction (again without preparation) -- de facto it amounts to an orthodox shock therapy programme. Garcia then disappears for 30 days (no joke). The country spends the next two years dithering between the worst of both worlds: the depressionary impact of orthodoxy without the boost in "business confidence". ]