Corporate leaders worldwide are celebrating the ascendance of Argentina's new pro-business president, Mauricio Macri, who took office on December 10.
"Macri's win in Argentina rouses investors," says a headline in the Globe and Mail, while The Economist is crowing over "The End of Populism" in Latin America. Normally reserved financial media are celebrating Macri's victory because international banks and corporations that have been largely shut out under former presidents Nestor and Cristina Kirchner will now be invited to re-enter the Argentine market, which has the third-largest GDP in Latin America, underpinned by enormous natural resource wealth. In the nearly euphoric media coverage, coded warnings about the need for a "highly sensitive fiscal adjustment" are being ignored.
Macri is being breathlessly promoted by investors not simply because Argentina will now be open to global finance, but also because they are hoping his victory signals a possible end to the tenuous leftist project in South America's largest economies. In Brazil, Venezuela and Chile, leftist governments are teetering or moving to the center. Argentina's outsized influence as a leader in the fight against neoliberalism amplifies the importance of Daniel Scioli's - and by extension, Kirchner's - defeat.
Investors are hoping Macri's victory signals a possible end to the tenuous leftist project in South America's largest economies.
Argentine voters narrowly elected Macri, a wealthy businessman and former Buenos Aires mayor, as president on November 22, 2015. Macri was running under the banner of his own pro-business Cambiemos coalition party. (Cambiemos means "Let's Change.") He defeated Scioli, the governor of Buenos Aires province, who ran as the candidate of President Cristina Kirchner's Front for Justice Party. His election ended 12 years of rule by the populist husband-wife duo of Nestor and Cristina Kirchner, who have dominated Argentine political life since 2003 with their rejection of the neoliberal Washington Consensus.
I asked Claudia Oxman, a politically progressive linguistics professor at Voces del Sur who distrusted both candidates, to characterize the election. She said the country was moving from a "pre-capitalist" government to a government offering "a fiesta for global corporations." The next day, as if to punctuate her point, President-elect Macri named his cabinet, which is filled with US-trained executives from Goldman Sachs, JPMorgan Chase, Shell, Monsanto, General Motors, IBM, Siemens, Hewlett-Packard and the International Monetary Fund (IMF).
During the campaign, Sergio Carciofi, an attorney in Buenos Aires who publishes a popular blog on politics and culture, described the difference between Scioli and Macri to me in this way: "Scioli wants a state that intervenes in the market. Macri wants a market that intervenes in the state." For the past decade, most of South America has opted for state intervention. Amid this wave, the Kirchners have been Argentina's imperfect but emphatic response to the suffering inflicted by a ruinous, decades-long succession of neoliberal regimes. The 2015 election changes that narrative.
For the past four decades, Argentina has been the international test lab for neoliberal policies. The economic program that ravaged Greece and other lower-income nations of the eurozone was first tested and refined in Argentina. Argentina has been subjected to every variety of neoliberalism and is about to be tested again. The potential global consequences of the 2015 election can be understood only against the backdrop of the nation's often violent history as a neoliberal proving ground.
Neoliberalism at the Point of a Gun, 1976-1989
From 1976 to 1983, in a crude precursor of today's financialized neoliberalism, Argentina was ruled by a US-backed, anti-communist military junta trained at the US Army's School of the Americas. The junta "disappeared" (murdered) 30,000 people and tortured tens of thousands more while implementing the National Reorganization Process, a program designed to stamp out all resistance from the left while privatizing state-owned industry nationwide. The entire murderous fiasco, retroactively labeled the "dirty war," was fueled by a 525 percent increase in annual foreign borrowing backed by the IMF.
With their economic program in shambles within six years due to mounting debt and inflation, the military dictatorship was unable to maintain control after Argentina's humiliating defeat by England in the Falkland Islands war in 1982. The first democratic elections in nearly a decade were held in 1983, bringing moderate Sen. Raúl Ricardo Alfonsín to power.
Alfonsín is revered in Argentina as a president of unimpeachable integrity who started bringing junta leaders to trial until they forced him to sign an amnesty law. However, he was unable to generate economic growth or bring inflation under control after years of foreign borrowing and mismanagement under the junta. The IMF and World Bank continued to insist on austerity, and Alfonsín was forced from office by a collapsing economy before the end of his first term.
The Go-Go Neoliberalism of the 1990s
Carlos Menem, a provincial governor, won the presidency in 1989 running as a traditional Peronist, acting on the concept of state intervention codified under Juan Perón. Once elected, he quickly embraced the Washington Consensus model of fiscal austerity, reduced wages and privatization. Menem, an infamous Ferrari-driving, model-dating playboy, was a golfing buddy of George H.W. Bush and George W. Bush. In an act that perfectly symbolizes the logic of his economic program, his government awarded the lucrative Buenos Aires natural gas concession to Enron in direct response to lobbying by the Bushes.
Menem also pegged the value of the Argentine currency to the US dollar on a one-to-one basis, making the dollar the de facto currency. For a few years, this gave Argentinians enormous purchasing power worldwide and the illusion of "first-world" status, much like Greece, Spain, Italy, Ireland and Portugal during the first few years after switching to the euro.
As an international currency underwritten by the largest economy in the world, the value of the dollar rose dramatically during Menem's 10-year regime, creating enormous fiscal deficits for Argentina, whose peso could not keep pace. Menem responded with brutal budget cuts, wholesale privatization and massive borrowing from the IMF. The dollar peg, like the abandonment of local currencies for the euro 20 years later in Western Europe, was unsustainable. Local economies lose their flexibility when they are tethered to global currencies. The IMF demanded more severe cuts in social spending coupled with lower wages in exchange for additional dollar-denominated loans, and Menem was driven from office.
Neoliberalism in Crisis and the Rise of Kirchnerism
From Menem's departure in 1999 until 2003, Argentina was in economic chaos. After decoupling from the dollar in January 2002, the peso suffered a 390 percent loss in value. The government defaulted on an external debt of $100 billion the same month, the largest sovereign debt default in history. With plunging GDP and soaring inflation, the middle class was wiped out almost overnight, leaving 50 percent of the population in poverty. In a nation of abundant agricultural production, there were ongoing food shortages as the IMF continued to insist on austerity in exchange for the possibility of more loans. Citizens were denied access to their bank savings in a desperate attempt to preserve dwindling federal currency reserves. There were daily protests in the streets, culminating in a succession of five different presidents in a two-week period ending January 2, 2002. Nearly three decades of neoliberal economic terror and domestic corruption had left the country in ruins.
Amid the chaos in 2003, little-known regional governor and civil rights attorney Nestor Kirchner was elected president, and Argentina began to chart a new course combining reconciliation with the past and targeted state intervention in the economy.
The outcome of this experiment with a rebranded neoliberal "revolution of joy" is likely to reverberate far beyond Argentina's borders.
Adopting a program of native Peronist solutions, Kirchner shifted the focus of government policy to economic self-sufficiency, while key sectors of the economy were re-nationalized. Spending on social welfare programs, health and education was expanded. Wages and pensions were increased. Domestic manufacturing was incentivized, while taxes on Argentina's wealthy agricultural export sector were increased to offset domestic spending. Annual investment in transportation, energy and communications infrastructure rose dramatically as part of a long-term government plan. Kirchner was also supportive of ownership claims by unemployed workers who had taken over hundreds of abandoned businesses and factories to keep them productive during the crisis as part of El Movimiento de Autogestión. Trials of war criminals for human rights abuses during the dirty war accelerated under Kirchner after he overturned the impunity laws imposed on Alfonsín. Foreign debt, including the IMF, was restructured and repaid over a three-year period.
In the decade from 2003 to 2012, with Nestor Kirchner as president the first four years, followed by his wife Cristina from 2007, the debt-and-austerity-driven agenda of the global financial establishment was rejected in favor of a focus on domestic development and investment. In response, the Argentine middle class doubled to more than 18 million citizens, while annual economic growth averaged 6.2 percent, reaching 8.2 percent in 2010.
The Election of 2015 and the End of Kirchnerism
During her second term, Cristina Kirchner faced an array of intractable problems, ranging from fierce domestic opposition on the right, to reduced tax revenue from agricultural exports in the face of depressed global commodities prices. She also had to fight an assault from US vulture funds that were essentially running their own foreign policy. These funds forced a technical default on the nation and made Argentina a pariah on global financial markets.
Even with these allowances, Kirchner has been a much more divisive president than her husband, who died in 2010. Self-consciously styling herself as a latter day Eva Perón, her presidency veered into a near cult of personality by 2015, punctuated by melodramatic television appearances, bitter feuds with the media ending in press censorship, intentional class polarization, the mysterious assassination of special prosecutor Alberto Nisman after he threatened to implicate Kirchner in a criminal cover-up and endless disagreements with other member nations of Mercosur, the South American trade alliance.
Kirchner failed to provide the kind of governance necessary for deep structural change aimed at building a sustainable alternative to neoliberalism. Perhaps this is too much to ask of any individual leader, but Argentina is nonetheless in the midst of an economic decline that is evident in daily life, with anemic growth of only 0.5 percent in 2014, compounded by nearly 28 percent inflation, ballooning deficits, high unemployment, increasing crime and a dual exchange rate system that has caused many Argentines to hoard US dollars. At the same time, a suspicious increase in the Kirchner family's personal wealth amid widespread allegations of corruption drove many voters into the arms of the opposition in the 2015 election.
Macri's New Model: Neoliberalism With a Human Face
In the final days of the presidential election, Cristina Kirchner often appeared in public, with Scioli warning of a return to the "savage capitalism" of the past if Macri were elected. Numerous people in Argentina have told me they were terrified of this outcome but nonetheless voted for Macri to put an end to the corrupt cult of personality they thought Kirchner's administration had become. Voters wanted change, and Macri ran an upbeat campaign about going forward together with a program of national renewal, while offering as few specifics as possible.
Macri is well aware of the fear most Argentines feel about neoliberalism, a term that is widely understood in Argentina. Although he ran as an unabashed free-market candidate, he has assiduously presented himself as the harbinger of a new, more compassionate and inclusive model of capitalism, calling his campaign a "revolution of joy" while running on a platform of "zero poverty" and massive infrastructure spending.
Gone are the crude tactics of the dirty war era; nor will Macri be bringing Menem's Ferrari out of the garage. In 2015, technocratic neoliberalism has been repackaged with a "joyful" human face that wants to eliminate poverty. On election night, Macri even managed to do an entertainingly offbeat victory dance that spawned an amusing wave of video spoofs on social media.
During his eight years as mayor of Buenos Aires, Macri has governed as a competent technocrat who defines his primary constituency as upper-income urban professionals. He made transportation and infrastructure a focus of his administration, transforming central Buenos Aires into one of the most pedestrian-friendly, multi-modal transit models in the world. Although Macri has promised similar transformation and infrastructure spending for the rest of the country, his investments and tax credits as mayor have been heavily tilted in favor of the city's wealthiest barrios. In a troubling sign for the future - and even with allowances for the government's unreliable statistics - municipal debt, income inequality, unemployment and crime in Buenos Aires have risen more sharply than in the nation as a whole during Macri's mayoral tenure.
In spite of his lack of specifics on almost every issue, Macri has given a hint of the philosophy underlying his proposals with his "pobreza cero" (zero poverty) plan. Out of a population of 40 million, the Social Debt Observatory in Buenos Aires estimates the number of Argentinians living in poverty at 11 million. As a solution, Macri is proposing the use of the nation's social security fund to underwrite new low-income home mortgages. To imagine an equivalent scenario in the United States, think of the federal government using money from the Social Security Trust Fund to underwrite millions of subprime mortgages, but packaged as an anti-poverty program.
Macri has vowed to run an administration of high ethics, and there is no reason to disbelieve him. He is placing his considerable assets in a blind trust and pledging to fire any official in his administration at any hint of corruption or graft. The problem is not with Macri's personal ethics, but with his blind devotion to technocratic market solutions, irrespective of how badly the markets are rigged in favor of the financial and corporate sectors.
In this election, the desire for change and a creeping sense of isolation from the rest of the developed world narrowly outweighed voters' bone-deep fear of returning to the violence of unchecked neoliberal economics, which Argentina knows more intimately than any other nation, including Greece. With his optimistic vision of Argentine renewal, unity and prosperity, Macri managed to defuse these lingering fears with enough voters to squeak out a victory of less than 700,000 votes. The repackaging of Macri's neoliberal views as a grand project of optimistic national renewal is likely to become the new model for pro-market forces across South America and beyond.
Cristina Kirchner has pledged to continue leading the opposition, opening speculation that she may run again in 2019. Her Front for Justice Party still has sufficient votes in the Chamber of Deputies and Senate to resist much of Macri's agenda, and there are other promising candidates from her party for the next election besides Kirchner herself.
Argentine voters are weary of having to choose between populist political intrigue on the left, and unfettered neoliberalism on the right. Nonetheless, as Macri and his cabinet of corporate technocrats dance their way into power, Argentina is once again the global laboratory for neoliberal experimentation and resistance. As in the past, the outcome of this experiment with a rebranded neoliberal "revolution of joy" is likely to reverberate far beyond Argentina's borders.