By Alejandro A. Tagliavini *
Let’s start by clarifying two questions.
First, largely because of false-but well camouflaged-“prophets of freedom,” public opinion is convinced that Macri is “pro-market,” false. On the contrary, he is damaging private activity and the government says it openly: “to lower inflation we will not care about the level of activity”.
The Fraser Institute, in its last Index of Economic Freedom -with data of 2016, a year of current government-, is very benevolent with Macri but still places Argentina in 160th place under the Congo, Syria and Algeria, falling 7 positions since the previous year, although the score increases somewhat in tune with the global rise. The Heritage Foundation -also very benevolent- in its latest index -2017 data- places the country in the 144th position under the communist Vietnam, Ethiopia and Micronesia, although rising from 169 in the 2016 edition (data of 2015).
And things have deteriorated noticeably since then: less market freedom, among other things due to the increase of the brutal fiscal pressure, intervention in the exchange and financial market, etc. Be that as it may, Argentina is today a repressed economy, at the bottom of the list. As a consequence of this repression, the next administration is estimated to receive a country with a GDP per capita 10% lower than in 2015.
By the way, the one who works is the market because it has no other way of living like the State that, with its monopoly of violence, collects taxes parasitizing on the private ones. To give an example, Russia was the world’s leading grain exporter until the USSR nationalized all land and became the largest global importer. More than five million people died from starvation until the USSR authorized mini private farms that, occupying only 3% of the arable land, produced 27% of the food.
Then, with the private sector increasingly smaller and the parasite larger, Argentina plunges strongly. And as the market does not lend money to the State because its project is unfeasible -analysis done by any lender- the government went to the multi-state FMI. Now, it is irrational to believe that the oxygen of the Fund serves to save time, correct errors, and converge towards an efficient economy since, if it were true, the market would have lent it the funds. That is, in a vicious circle, the IMF finances the sure fall that, the later it arrives, the harder the end will be.
The second issue is, precisely, the IMF. Due to a deceptive discourse and that is supported by “capitalist” governments, public opinion believes that it is a champion of the market when the opposite is true. From the theoretical point of view it is clear: it is a (multi) state bank and, by the universal principle of survival, has a strong tendency to live and grow, that is, to strengthen the state sector.
But if any naive had any doubt, just look at their trajectory: in one hundred percent of cases the IMF promoted the enlargement of the state sector (“to save” it) increasing their parasitism on the private sector, in particular, increasing taxes. For example, in Greece the IMF carried out three “rescues” in 2010, 2012 and 2015, generating € 260 MM of external debt (180% of GDP), a 27% drop in GDP, and unemployment that today reaches 20%. Only in 2017, when the IMF plan was completed, Greece managed to grow a shy 1.4%. Privatizations do not exist or any important deregulation.
The main opposition leader, center right Kyriakos Mitsotakis, explained to El País in Madrid that “they have overburdened the economy with taxes to beat the austerity goals that were set for them”, in addition to a tremendous bureaucracy, which is why external investments do not come and, in general, investment has fallen 60% to the critical level of 10% of GDP, according to the Bank of Greece.
Anyway, while all the indices fall precipitously – but the poverty that rises – with much brashness to the Argentine government it does not care the level of activity but feeds the “carry trade” – foreign capitals that take advantage of the very high interest rates of the government and then return to their countries- to attract “hot dollars”, in order to feed this financial “bicycle” they have created. This explains why in the financial sector they are so happy with the IMF, let us see how long this happiness lasts.
* Member of the Advisory Board of the Center on Global Prosperity, Oakland, California