(This article was submitted for publication in January 2002, when the events in Argentina were still unfolding. Since then, Peronist Dulhade, who had lost the last elections, has taken over as President. While he has announced some measures to defuse the people’s protests, the new ruling dispensation cannot redress the causes underlying the present malaise. There have been reports of clashes between the supporters of the new Govt. and left forces, including the revolutionary forces, on the policies of the new Govt.             – Editor)

Lakhs of people poured on to the streets of capital Buenos Aires and other major cities of Argentina in massive protests against IMF authored economic disaster wrecking the country. Protestors set fire to the Finance Ministry and two major banks. Hungry and angry people ransacked the supermarkets with their goods mocking at the destitute people. Lakhs of people surrounded the Presidential Palace demanding President Fedinando de la Rua to step down. The President, true to the ways of all anti-people rulers, tried to play the game of carrot and stick – clamping down Emergency in the country and making resignation of Economy Minister Domingo Cavallo, who like Manmohan Singh in India, was credited there to have charted the new economic course, but who, unlike Manmohan Singh, was there to face the economic disaster that these policies invited.

Argentina is a good example of how once a prosperous country in a not-so-distant past has been reduced to destitution and penury by the neo-colonial exploitation and plunder which the foreign “inspired” economists with their diverse sources of inspiration have been hailing as “economic miracle”. Argentina was, prior to Second World War, an economic power due to its exports of beef and other farm products. Its per capita income was similar to that of France. These economic hangers-on of MNCs and imperialists who were rubbing their hands in self-satisfied glee when Mexican Economy crashed or when Brazil’s currency, the real, plunged in 1999, were running for cover when millions of people came out in protests crippling the country.

In order to curb runaway inflation in 1980s, Domingo Cavallo implemented IMF authored plan in 1991-94. Argentinian peso was pegged to US dollar with a currency board. With confidence of foreign investors ‘restored’, foreign loans poured in big quantities. Argentina was hailed as a model of “economic miracle” that made it one of the most indebted countries in the world. Its foreign loan is at present $132 billion. Cavallo and the successive Argentinian Govts. dutifully implemented the prescriptions of the IMF and the US Govt.

The policies initially succeeded in curbing inflation largely due to foreign loans. But the loan burden kept on mounting. On the other hand, the farm exports on which Argentina was dependent for its export earnings, declined. As the terms of trade between the agricultural goods and industrial goods kept on worsening against the agricultural goods, and due to the influx of cheaper goods from other Latin American countries which were forced to devalue their currencies owing to economic crisis, Argentina’s export earnings kept on dwindling. This is a uniform and inevitable result of the imperialist sponsored export-dependent model of development which has come crashing down in all parts of the globe. Imperialist countries, through their institutions like World Bank and IMF, have been imposing on third world countries strict economic model of only going in for labour intensive, natural resources dependent, low value addition products whose value has progressively declined.

While the recipe of economic catastrophe was being written, make-believe world of economic wellbeing was being created by sponsored economists, govt. officials and ruling class politicians. As a Brazilian newspaper rightly commented, “Argentinian crisis is the disastrous end to an illusion fostered by IMF.”

Declining exports earnings on the one hand and rising cost of servicing of foreign debt on the other brought the economy under tremendous strain. The Govt. was left with little choice within IMF imposed economic framework except to cut down governmental spending to service the loan. IMF too tightened the screws by demanding that Argentina balance its budget for 2001 and withheld a stand-by loan of $1.3 billion. Cavallo tried to meet IMF demand by reducing govt. spending by 20%. Unemployment soared to nearly 20% and if underemployment is taken into account, it crossed 30%.

The brunt of these cuts was borne by the workers of govt. undertakings and pensioners whose pension payments were withheld. Govt. redirected pension cash towards paying off debt. Further, Govt. put a ceiling on withdrawal from banks at $1000 per month. Wages of the public sector employees were reduced and in different sectors wages were just not paid. This brought the whole economic activity to a standstill with people having no money to spend. With export earnings dwindling down and IMF withholding the stand-by credit, the crash came soon enough.

Workers quickly reacted to the govt. policies. On 13th December, 2001, leading trade unions called for a country-wide strike which brought the whole country to a halt. Workers joined the protests in large numbers. Govt. condemned the strike and refused to withdraw the curbs on bank withdrawals and release the pension fund. On 19th December, the whole nation poured onto the streets to punish the insensitive Govt. which was more loyal to IMF and US Govt. rather than listening to the woes of its own people. On 20th December, in a cosmetic move, President de la Rua made the Economy Minister Cavallo resign and declared country-wide siege. De la Rua also appealed to Peronist opposition party to form a Govt. of national unity which they refused. Police was asked to crush the protests but these were simply too huge to be handled by the police. More than 24 people were admitted to have been killed in the protests with the number of injured crossing 500 and more than 2000 arrested. On 21st December, de la Rua had to flee in a helicopter from his presidential palace.

While Fedinando de la Rua Govt. has collapsed, the economic crisis of Argentina is much too deep to go away with the govt. Peronist Party’s Adolfo Rodruguez Saa had succeeded as Argentina’s provisional President. It was the Peronist Party’s Menem who was in power from 1989-1999 when these policies were formulated and implemented. The same party is now again in power. With the task of servicing the debt needing to be addressed, Saa has decided to default on the payment.

While this is the easier part of the decision making, more onerous task lies ahead. The western economists and their apologists are suggesting two courses: either devaluation or dollarization, each course flawed with danger. While devaluation will increase the debt burden of the companies and businesses leading to large-scale bankruptcies, dollarization i.e., abolishing peso completely, will mean extreme hardships to the people with no prospect of revival. Argentina will have no control over its own currency. IMF may yet bail out Argentina temporarily by doling out fresh loans, but that will be only a temporary reprieve.

A larger question for third world countries like Argentina is to break out of the mould created for them by IMF where they are perpetually to be suppliers of farm products and low value goods to the imperialist western markets. The whole economic relations among countries are being fashioned where the third world countries are being reduced to a vast countryside for the metropolitan west. This gives no scope to third world countries to develop and they must challenge this WTO-IMF-WB controlled imperialist framework.

It is obvious that ruling class parties in Argentina can do nothing of the kind. They will try to “defuse the people’s anger” by short-term measures trying to buy space from the IMF by accepting more onerous conditions. It requires intervention of working class and revolutionary communists to break through the web of neo-colonial exploitation and plunder. It is not enough to throw out a particular govt., but to throw out all the forces responsible and committed to this policy framework. The Argentinian crisis is no accident, just as crisis in South-East and East Asian countries, Mexico, Brazil and host of other countries were no accidents either. It is the natural and inevitable product of the imperialist dictated economic policies which the rulers of these countries are dutifully following. By precipitating such crises the imperialist countries want to further reduce the wages in these countries, cheapen the labour power there and consequently the products of these countries, while further increasing the profits of the MNCs from the western countries. The whole framework is so heavily loaded in their favour that they benefit in either case, raking in huge profits when the going is good and increasing their stranglehold and creating conditions for furthering their profits when the crash occurs.

Latin American press has rightly blamed IMF and US Govt. for the economic crash in Argentina. While Brazilian press has come down heavily on IMF for precipitating the economic crisis, a Chilean news paper has written, “Consequences of phenomena like globalization could lead Latin American countries to extreme situation like that in Argentina.” Putting the blame on IMF and US Govt., a Mexican news paper has written “Argentinian authorities followed the IMF instructions to the letter squeezing the population for more and more taxes. The responsibility of IMF and US Govt. is clear ...” There is no Stalinism or socialism to be blamed, high priests of global capital! The Buck has nowhere to be passed to. It stops with you.

The Argentinian crisis has several important lessons for India. Indian rulers have also been implementing the new economic policies since 1991 which are the policies of Structural Adjustment dictated by World Bank and IMF on all third world countries. Privatization of public sector, freeing the imports of goods produced in the country, cutting down subsidies, depressing the wages and earnings of labouring masses are some of the measures implemented in India too like Argentina. Results too are on the similar lines. Export earnings are dwindling down, while imports are burgeoning increasing the trade deficit. The only way for curbing the fiscal deficit in face of huge burden of debt servicing is to reduce the govt. expenditure. This will entail curtailing the support to agriculture, expenditure on development and other measures meant to benefit the people. The result is depressing purchase of the people with poverty in plenty. While the results are clear to everyone who cares to see, the Govt. is going ahead with implementation of disastrous WTO-IMF-WB framework. Despite making noises it meekly surrendered the interests of the country at Doha.

While the lot of the people is progressively deteriorating, Indian Govt. is trying to divert the attention of the people through chauvinistic propaganda and itching for war with Pakistan. Argentinian crisis is a grim reminder of things to come. While crisis in every country does have its specific features, the general cause i.e., of neo-colonial exploitation and plunder by imperialists, is common to all of them.