FALL 2001 67

Int. Journal of Political Economy, vol. 31, no. 3, Fall 2001, pp. 67–88.
© 2004 M.E. Sharpe, Inc. All rights reserved.
ISSN 0891–1916 / 2004 $9.50 + 0.00.

RONALDO MUNCK

Argentina, or the Political Economy

of Collapse

Toward the end of 2001, Argentina entered a paroxysm of economic,

social, and political collapse that was practically unprecedented. The
largest debt default in history (US$155 billion) followed, but this seemed
to be only a symptom of the broader crisis that was unfolding. At the
start of the twentieth century, by contrast, Argentina was on a markedly
upward swing, with the economy ranked in the global top ten. Waves of
migrants came from Europe to make their fortunes in this golden land.
What happened in Argentina in 2001 to precipitate such a dénouement?
Was the International Monetary Fund (IMF) mainly responsible since,
in the previous decade, Argentina had followed IMF strategy to the let-
ter? What are the implications of this virtual collapse of a major economy
for the future of neoliberalism? What is to be done?

Antecedents

There is much at stake in the Argentine crisis: on the one hand, the
continued credibility of the IMF as guiding hand of neoliberal global-
ization and, on the other hand, quite simply the viability of Argentina as
a going concern as a nation-state. Diane Abbott, a rare socialist Labor
Member of Parliament in Britain declares that: “Argentina is an extreme
example of what happens when a country is run for foreign investors and
not for local people. . . . Globalization does not solve poverty. It creates
poverty and social chaos. . . . More globalization will mean more

Ronaldo Munck is professor of political sociology, University of Liverpool, United

Kingdom.
67
68 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

Argentinas” (Abbott 2001, 1). If in global terms Argentina is a signifier

for all that is wrong with neoliberal globalization, at a local level the
concerns are more direct. There is widespread talk of anarchy in terms
of the economic rules that govern most societies. This “survival of the
fittest” mood is also dominant in the political arena where widespread
disenchantment with politics generally is reminiscent of nothing so much
as Weimar Germany in the 1920s.
The crisis in Argentina broke out towards the end of December 2001.
Since the beginning of that year, it was clear that a massive currency
devaluation was on its way. Popular mobilization had also been mount-
ing steadily with road blockages and sporadic local uprisings. The po-
litical class as a whole was losing credibility as leftist Vice President
“Chacho” Alvarez resigned and the two main political parties became
mired in corruption. The pressure of foreign creditors was becoming
ever greater, and some banks began moving out their dollar reserves in
anticipation of an end to convertibility between the dollar and the peso.
Then on December 19 and 20, the citizens of Buenos Aires rose in total
opposition to the government of Fernando de la Rúa. While workers
mobilized, it was mainly the middle classes out in the streets, as they saw
their savings evaporate through devaluation. The government responded
with repression, killing 30 people and injuring hundreds more. By the end
of these two memorable days, President de la Rúa was fleeing Govern-
ment House in a helicopter in order to avoid the hostile crowds outside.
Just over 100 years earlier, another economic crisis had rocked Ar-
gentina. In 1890, the London financial house Baring Brothers collapsed
when United Kingdom interest rates rose and its massive investment in
Argentina proved unsustainable. A collapse of Argentina’s economy
followed, as did a devaluation of the peso and a moratorium on foreign
debt. What the Baring Crisis of 1889–90 revealed were deep flaws in
Argentina’s development model based on foreign borrowing. It also made
plain the extent to which corruption oiled the wheels of Argentina’s po-
litical economy. Then, as now, confidence in the basis of the develop-
ment model evaporated very quickly. However, as David Rock notes,
“If the similarities to the crisis of 2002 are striking, the differences are
perhaps more instructive” (Rock 2002, 59). Buoyant foreign demand
then revived export-led growth in Argentina, and British creditors were
much more understanding than the IMF is today. The current crisis hardly
provoked the same type of panic that the Baring Crisis caused in the city
of London.
 FALL 2001 69

Why was Argentina, at the start of the twenty-first century, facing a

crisis similar to, but even graver than the one it had faced towards the
end of the nineteenth century? While I believe the present crisis is
conjunctural and specific, the historical background does set the con-
text in which it occurred. It also sets the structural parameters that
determine which options are now possible and which are not. This
section sketches some of the main phases of Argentina’s political
economy from 1890 to 1990. From 1890 to the crash of 1929, Argen-
tina lived through what was known as the “golden era,” based on an
agro-export economy. After the Depression of the 1930s, the Peronist
period (1945–55) led to a fundamental reorientation based on state-led
industrialization. After the 1955 military coup, there were a succession
of weak civilian governments and illegitimate military regimes. The turn
to neoliberal globalization occurred under the 1976 military dictator-
ship that was singularly repressive. In 1983, democracy returned but
led to the post-1989 Menem government that completed the neoliberal
agenda in Argentina.
With the establishment of a strong and stable national government in
1862—following a period of federalism and conflict—Argentina en-
tered a period of sustained growth based on agrarian exports. Integra-
tion with the world economy—based on the differential rent generated
by the fertile Pampas plains—generated a visible degree of moderniza-
tion and attracted thousands of overseas migrants. Urbanization and a
subsidiary industrialization process advanced swiftly as the social trans-
formation in Argentina accelerated in the 1880s. The Baring Crisis was
successfully overcome, and World War I created the need for greater
industrialization, based on protectionist measures and widespread pub-
lic investment in infrastructure. From 1875 to 1896, aggregate output
in Argentina grew at an annual average of 3.7 percent (Lewis 2002,
88). Thus, Argentina was seen to be in the same category as other
“settler” economies such as Australia and Canada, heading for a se-
cure place in the international system based on sustained growth and
political democratization.
However, as with the rest of the world, the 1929 crisis severely shook
Argentina’s agro-export economy and its political governance. The in-
ternational prices of agrarian products slumped and thus industrializa-
tion was promoted to make the economy less reliant on international
fluctuations. The agrarian oligarchy, however, continued to rule, and the
1930s became known as the “Infamous Decade,” due to the level of
70 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

political corruption. Industrialization advanced in the 1930s—a 1940

census showed that 40 percent of industrial establishments had been
formed since 1930—but the links with imperialism remained intact. The
Roca-Runciman Pact of 1933 effectively made Argentina part of Britain’s
informal empire. However, industrialization, albeit subordinate to the
agro-export orientation and reluctantly pursued, did produce a sizeable
industrial proletariat. Social transformation and political organization
led to a need to break away from the corrupt stagnation of the 1930s. An
obscure army colonel, Juan Perón, began to attract a labor following for
his nationalist project, and he became president in 1946 at the head of a
mass movement.
The Peronist decade (1945–55) completely transformed the political
economy of Argentina and is a crucial reference point. Under Perón, an
industrialist alliance prevailed over the agrarian oligarchy and the in-
dustrial working class became a powerful social agent. Space for this
strategy was created by the virtual collapse of Britain’s empire after
World War II, and the United States drive to global domination was just
beginning. Thus Peronism came to power at a unique historical juncture
that allowed it to be nonaligned and to promote state-led industrializa-
tion. The massively unionized working class received steadily rising
wages and helped create a sizeable internal market. This Bonapartist
regime, above social classes to some extent and quite authoritarian, forged
a project for independent capitalist development in Argentina. Partly
due to Perón’s own weakness, and even more to counter-organizing by
traditional social forces in Argentina, a military coup in 1955 put an end
to the Peronist decade. A decisive turn to the international capitalist
market ensued.
After the fall of Perón, a period of chronic political instability opened
up with a succession of military regimes, civilian interludes, or a com-
bination of both. The regimes promoted the expansion of monopoly
capitalism, and the economic consolidation of an “internationalized”
fragment of the bourgeoisie integrated into the international circuit of
capital accumulation. The military dictatorship that came to power in
1966 represented the most coherent attempt by this sector to break the
particular stalemate that had characterized Argentina since 1955. In
Gramscian terms, it was an attempt to resolve in its favor the situation
of organic crisis and transform its economic predominance into politi-
cal hegemony. However, starting in 1969 with the Cordobazo, the “new”
working class entered a very active phase, which led to the return of
 FALL 2001 71

Perón in 1973 in an attempt to “tame” this movement (see Munck

1987, for the role of labor). Perón died in 1974, and his widow’s re-
gime rapidly decomposed into fighting factions that led to the military
coup of 1976 that, at first, had considerable tolerance if not support
from the population.
A new period of military rule began in 1976 with the objective of
decisively defeating the labor movement and breaking the pendulum
pattern of politics which had prevailed in Argentina since 1955, if not
1930. It appeared at first that the dictatorship was simply seeking to put
the clock back to the pre-1930 period to recapture the “golden era,” as it
were. But an unprecedented level of repression was unleashed on the
population, and the trade unions were prevented from carrying out their
normal functions. National industry was discouraged, and the interna-
tionalized sector was fomented. If there was no going back to the pre-
1930 world order, what was happening was the beginning of the new era
of globalization. Financial deregulation, opening up of trade, and
privatization of the state sector all helped pave the way for this new era.
However, in a bid to increase its waning legitimacy at home, the mili-
tary regime decided to launch an adventure in the South Atlantic to re-
cover the Falklands/Malvinas Islands. Their defeat by Britain’s armed
forces sealed their fate on the home front and democracy was reclaimed
by the people.
The 1983 elections saw the victory of the largely middle-class Radi-
cal Party over the trade union-based Peronists. This represented an
ethical choice for democracy over the authoritarianism and corruption
of the past. Much of the left went over to the Alfonsín government as
it sought a revalorization of democracy and a rational economic strat-
egy. Raúl Alfonsín put the military leaders on trial and dealt effec-
tively with some further military revolts. However, his economic policy,
following some early successes, led eventually to a hyperinflationary
outburst. By 1985 a “war economy” was in place as prices and wages
were frozen and a new currency (the austral) was issued. Politics was,
from then on, primarily about the economy. The so-called patria
financiera (financial fatherland, that had benefited from a speculative
boom under the military regime, had never been brought under con-
trol. The Austral Plan failed, tax revenues were collapsing, the Central
Bank was practically bankrupt, and, most disturbing to the political
economy of Argentina, inflation rates began to accelerate, reaching
hyperinflationary levels by 1989.
72 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

Stability

President Carlos Menem was a Peronist of a very special type. Menem

was the governor of the poor province of La Rioja, and he cultivated all
the mannerisms of the provincial caudillo (party boss). He appealed to
the poor with vague, populist promises but also made alliances with
powerful economic interests. The traditional Peronist banners of “social
justice” (hence the name Justicialismo given to Peronism) were unfurled,
but so also was the banner of “modernization.” Once in office, it became
clear what this meant, as Menem carried out a full-scale conversion from
economic nationalism to a total endorsement of neoliberalism. Menem’s
election marked a consolidation of democracy in Argentina in terms of
an orderly succession of freely elected governments. However, it led to
a marked deterioration of democratic norms as authoritarian practices
were used to impose market-friendly stability on the country and to fore-
close any alternative political economy paths of development.
Menem’s rise to power can only be understood in the context of the
Alfonsín government’s failure to achieve economic stabilization. On the
question of foreign debt generated by the military regimes, some slack
was granted to the new democratic government, but its constraints were
soon felt. U.S. policy on the debt issue assumed political and economic
capabilities that were simply not there, and the result, as Canitrot puts it,
was that “the Latin American economies were destroyed and the gov-
ernments which emerged from democracy were completely weakened
(and the debt was not paid)” (Canitrot 1991, 129). The Austral Plan was
formulated to cut the inflationary spiral through a price and wage freeze
and to launch a new currency. Canitrot, involved in implementing the
plan, admitted, however, that it “had the negative of weakening
[government’s] political capabilities and of deteriorating public confi-
dence in the efficiency of the institutions of representative democracy”
(Canitrot 1991, 130). The gap between the reformist rhetoric and the
reality of a free-for-all grew, and by 1989 the inflation rate had reached
a staggering 3,000 percent per year.
In political terms, Menem’s term in office marked a distinct deterio-
ration of democracy compared to Alfonsín’s period. Bypassing Con-
gress in many cases, Menem began to pass controversial measures
through executive decree. Although corruption had existed before in
Argentina, it reached new levels of openness and persistence under
Menem. Close relatives of his were involved in various scandals, in-
 FALL 2001 73

cluding one involving “narco-dollars”; in others, the U.S. Ambassador

complained of bribe demands from senior officials (Swiftgate), and there
was a scandal in the milk industry (Milkgate) involving the president’s
private secretary. Due to the overwhelming desire for economic stabil-
ity after the hyperinflation of 1988–89, there was little reaction from the
population over what was openly known as Menem’s “kleptocracy.”
While Menem created a feeble basis for democratic consolidation, the
simple fact is that for a whole decade there was simply no alternative
being offered to his authoritarian neoliberal turn.
In terms of Argentina’s role in the global system, the Menem period
was also marked by change. Under Menem, Argentina moved swiftly to
break all links with the Non-Aligned Movement, and Foreign Minister
Guido Di Tella rather crudely called for “carnal relations” with the United
States. There was no pretense that Argentina was anything other than
totally subordinate to the dictates of U.S. foreign policy—no more inde-
pendent forays into the world such as that of Malvinas in 1981. Now it
was to be “task forces” sent to the Gulf War, to Central America, or
wherever Argentina’s subordination to the United States could best be
demonstrated. The Menem regime even cancelled the Cóndor missile
program, much to the annoyance of nationalists in the military who
muttered darkly about “banana republics.” As what we now know as
“globalization” was taking shape in the early 1990s, Menem was poised
to shake off his earlier Tercermundista (third worldist) image and be-
come a propagandist for the “Free World’s” new order, which he aspired
to join.
The cornerstone of the political economy of Menemism was, how-
ever, the Convertibility Law of 1991, led by controversial Finance Min-
ister Domingo Cavallo. The struggle against hyperinflation was used as
a pretext to tie the peso to the U.S. dollar legally on a one-to-one basis.
From then on, domestic money creation would have to match the avail-
able amount of U.S. dollars, in order to avoid the money-printing syn-
drome of the inflationary past. However, as Halevi notes, “the fixed parity
between the dollar and the peso reduced the attractiveness of the coun-
try as an export platform, so that the implementation of the stabilization
program based on dollar-peso parity depended on privatization and fur-
ther borrowing” (Helevi 2002, 5). Indeed, the privatization of the state-
owned companies was a major component of Menem’s strategy and
provided him with considerable leverage in terms of dealing with the
large corporations, especially foreign ones that were just waiting for the
74 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

bargain basement sale to begin. As for the foreign debt, it continually

increased, as did the burden it imposed on society.
From the 1991 Convertibility Law to 2001, the private debt increased
eleven-fold. The state had taken over the burden of the private external
debt while the private sector carried on contracting more debts. At the
same time, as Halevi explains: “the state sells out its public activities
through privatization policies thus generating financial profits (rents)
for the private corporation. . . . The state then unloads the burden of debt
onto the whole economy, especially the working population” (Halevi
2002, 5) through cutbacks of social services and the whole panoply of
IMF austerity measures. In this way, privatization and the foreign debt
can be seen as linked to the opening of the economy to the world market
that has allowed transnational corporations to take over the command-
ing heights of the economy. Also, not surprisingly, during the 1990s
Argentina was favored by financial and “hot money” players eager to
make a quick profit.
Despite its obvious and glaring drawbacks, the Convertibility Plan
did signify stability for a population that had gone through the terrifying
experience of hyperinflation with its lose-lose effects on nearly every-
one. For Ana María Dinerstein:
Stability emerged as a new paradigm which organized capitalist anarchy
and the relationship between politics and economics in a particular way.
It also emerged as a means of achieving certainty and economic growth,
i.e., the control of the future, which was in fact a new form of expression
of capitalist violence. (Dinerstein 2003, 188)

Indeed, while under Alfonsín politics had been “revalorized,” under

Menem politics were completely subsumed under the “economic ques-
tion.” The achievement of this stability of a special type allowed Menem
to secure a second period in office in 1995, with an ample majority. It
was not until 1999 that the electorate thought stability had been achieved
and they could get rid of the erratic and authoritarian figure of Menem—
to be replaced by the sober (“boring” in his own words) figure of de la
Rúa from the Radical Party in coalition with leftist front FREPASO
(Frente del País Solidario: National Solidarity).
To understand this negative regime of stability, we need to spotlight
the particular nature of Argentina’s capitalist class. Under Menem, the
long-standing short-termism of the country’s capitalism was restruc-
tured and modernized. As Tedesco shows, on the basis of interviews,
 FALL 2001 75

“Argentine businessmen tried to transfer the transitional costs of the

reforms to other companies. Rather than sharing the costs and the ben-
efits of the 1990s reforms, businessmen exercised a logic of individual
action—a rapacious and predatory dynamic” (Tedesco 2001, 9). The
inevitable zero-sum game that ensued was not conducive to long-term
strategic thinking in the general capitalist interest. Rather, capitalists
took a personalized view of their relations with the Menem reforms
and disengaged themselves from the broader picture of Argentina’s
political economy. One can contrast this with the entrepreneurial, na-
tionalist, and cooperative (within competition) nature of Brazilian or
Chilean capitalism.
The contradictions of Menem’s political economy led inevitably to
another burst of inflation in 1998–99, as local industry began to lose
competitiveness and the foreign debt noose began to tighten. His ambi-
tion to run for a third term of office was thwarted by his own internal
opposition, and these divisions allowed the rather lackluster Radical Party
candidate to win in the 1999 elections. Corruption was now a major
issue, and de la Rúa was at least able to project a clean image; the left
also made significant advances. However, de la Rúa’s government suf-
fered from serious weaknesses, not least of which was the Peronist par-
liamentary and provincial superiority, which meant that all economic
measures had to be negotiated. The coalition which took de la Rúa to
power was also totally divided, leading to the resignation of the FREPASO
vice-president “Chacho” Alvarez in 2000. As the economic recession
that had begun in 1999 deepened, de la Rúa felt compelled to call back
Menem’s finance minister, Domingo Cavallo to implement yet another
orthodox austerity policy.
When mid-term elections were held in October 2001, the Peronists
made significant gains, but, even more disturbing in terms of the regime’s
credibility, the number of blank votes rose to an unprecedented––a legal
offense—level of 25 percent. Disenchantment with actually existing
democracy was becoming a major social phenomenon. Economic man-
agement seemed to be singularly ineffective as the country slipped deeper
into recession. Stability seemed to now become paralysis as the crisis
ahead loomed ever closer with no decisive action being taken. For most
of 2001, a devaluation of the peso was understood to be in the cards, but
convertibility remained inviolate. Adjustments demanded by the IMF
focused on reducing public sector wages and employment along with
already meager pension entitlements. Lack of international confidence
76 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

had a debilitating effect, as much financial investment fled the country

and interest rates on the foreign debt rose to 12 percent. Emergency eco-
nomic measures in November 2001 could not halt the slide. Capital fled
the country with devaluation of the peso now an almost total certainty.

Crisis

When the crisis finally erupted towards the end of 2001 and the historic
default and devaluation occurred, this was an event long in the making.
Since mid-2000, the world economy had moved into a generally reces-
sive phase. After 1998, the Argentine economy was in recession. Capital
fled the country as investors withdrew $1 billion per day by early De-
cember 2001. Default on foreign loans had also been inevitable for some
time. Trying to meet IMF conditions for further loans during this period
only deepened the recession. So, when Finance Minister Cavallo insti-
tuted the corralito (corral) in November 2001, severely curtailing ac-
cess to savings, the social revolt that ensued was entirely predictable.
Since 1983, nine IMF stabilization programs had come and gone. In
addition, the economic collapse at the end of 2001 represented a closing
of the political cycle that had started with the democratic elections of
1983. The political economy of democracy in Argentina was now at
stake.
As people lined up outside cash points or inside banks, desperately
trying to withdraw their savings, the social depth of the crisis became
clear. The corralito was, effectively, a state-imposed freeze on bank ac-
counts, and the devaluation that would inevitably follow represented an
unloading onto the population of the failure of an economic model. Presi-
dent Eduardo Duhalde, the Peronist caretaker president who took office
in January 2002, was at first adamant that the people would not bail out
the foreign banks. Eventually, the financial sector was able to lobby
strongly and as the gap between the peso and the dollar opened up, it
became clear that ordinary citizens would probably lose three-quarters
of their savings. Even a cursory acquaintance with events in Germany in
the 1930s indicates the social explosiveness of a situation where the
middle classes see their savings evaporate. The working class and un-
employed protestors now had a new ally in the struggle against
neoliberalism. This popular revolt thought of itself as apolitical: “We
are not Peronists, nor Radicals, nor socialists. We are just the people
who for the first time have organized themselves and know their own
 FALL 2001 77

strength,” as one resident put it or, as another said, “We want a fair
government of the people.”
While the people protested and organized, the main story was the rise
of the dollar against the peso after the end of convertibility. The dollar,
once “freed,” rapidly went up to 1.70 pesos, and by 2002 the dollar was
being valued at 3.5 pesos and more. Remarkable in terms of the political
economy of collapse is that in 2001 the foreign-owned banks remitted a
record level of profits: $284 million between January and September
2001, up 62 percent from the same period in 2000 (Página 12, February
18, 2002). That is to say, the big foreign banks were probably fore-
warned of the restrictions to be imposed by the corralito and were able
to remit much of their funds abroad. Then, at the height of the crisis—
December 2001 to January 2002—the large national and foreign-owned
export companies retained some $200 million (about 95 percent of total
earnings) abroad in the expectation that the dollar would rise in price in
Argentina. Central to this speculative maneuver were the oil companies
( one time state monopoly YPF now owned by Repsol, and the subsid-
iaries of Amoco, Occidental, Exxon and Shell) and the grain merchants
(Dreyfus, Bunge, Cargill etc.), along with the big steel companies (Siderca
and Siderar). The notorious U.S. company Enron also played a role
through its role in the gas sector.
The collapse of the Argentine economy in 2002 inevitably led to an
aggravation of a social crisis that had already begun to sharpen in the
mid-1990s. Over half the population of 37 million fell below the official
poverty line, and the proportion of indigent poor (who cannot buy basic
food) rose to 18 percent of the population. Among the “new poor” emerg-
ing in 2002 were many households previously classified as middle class.
Unemployment soon rose to 25 percent with a further 20 percent (at
least) classified as underemployed. Clearly, this sharpening of inequal-
ity and exclusion levels resulted from the new economic model launched
in 1990–91. A remarkable World Bank study, “Poor People in a Rich
Country. A Poverty Report for Argentina” found that: “While growth
resumed in the 1990s, the poor benefited relatively little in terms of
income gains from this resumption of growth. . . . In other words, as per
capita average income rose, the distribution of income worsened and
the incomes of the poorest 20 per cent actually declined” (World Bank
2001, 5). While the 10 percent richest group saw their income rise from
34 percent to 38 percent in the 1990s, the lowest 20 percent saw their
income decline 4.5 percent to only 3.8 percent.
78 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

One response to the collapse of the peso in early 2002 and the subse-
quent social dislocation was the emergence of a number of local curren-
cies, or parallel monetary systems. There was also remarkable growth
of a barter economy where local residents traded goods and services as
a way of making ends meet when the financial crisis hit the middle
classes in particular. Here, a community currency system emerged which
tended to promote an “alternativist” community consciousness among
residents in relation to the regime. Arguably, the barter economy and the
social currency scheme represented more than a means of survival, as
one Buenos Aires resident explained: “We are gathered in this place in
order to find a new way out, for survival, because of the political crisis
we have to seek each other out, to overcome the situation which our
families are facing. Necessity forces us to do things, to invent new situ-
ations” (cited in Pearson 2003, 224). Beyond the collapse of the great
neoliberal experiment in Argentina, there had to be something.
From the social protests in the streets in December 2001 and early in
2002 and the experiments with a barter economy sprung a more durable
form of social organization, in the shape of neighborhood assemblies
(asambleas barriales). In the asambleas, people from a neighborhood
would gather in a form of direct democracy to organize mass buying,
distribute food, and discuss the way forward. They would usually meet
on a weekly basis, and gradually they became more organized. In the
course of 2002, many of the asambleas began to publish journals, many
set up Web sites, and others organized workshops and cultural activities.
The asambleas were heavily concentrated in Greater Buenos Aires; of
the 272 asambleas registered in May 2002, 112 were in Buenos Aires
city and 105 in Buenos Aires province, reflecting to some extent the
greater involvement of the middle classes in this form of organization.
In the poorer provinces, other forms of organization evolved, but they
were perhaps less structured and certainly less visible than the Buenos
Aires asambleas.
Are the asambleas the germs of an alternative power or weak defen-
sive organizations bound to fade away if the economic crisis is over-
come? Most observers agree that they are not Argentina’s soviets,
although various leftist groups are acting as though they might be. How-
ever, they are widely seen as marking the emergence of a new radical
generation. One of the most remarkable facets of the December 19–20
mobilization was the youth of the participants. The Duhalde govern-
ment began in 2002 with praise for the asambleas, but by the middle of
 FALL 2001 79

the year, the interim president was heavily criticising them, and repres-
sion was even felt in many cases. Perhaps the best way to capture the
asambleas is in the words of Stella Calloni, for whom: “The asambleas
are memory, discussion, debate, transparency and future. . . . Each day
the imagination bears new fruit there and in the asambleas lies the best
revindication of the thousands and thousands of desaparecidos [disap-
peared] of another epoch” (Calloni 2002, 21).
In the front line, dealing with the consequences of the collapse of the
Argentine economy, was, inevitably, the IMF. What is perhaps most in-
teresting is the way the IMF strategy in relation to Argentina has been
questioned by once-stalwart supporters of that organization. As many
pointed out early in 2002, “Argentina’s crisis was obvious to everyone,
it appeared, except to the IMF” (Guardian, January 19, 2002, leader).
The call to radically reform the IMF spread rapidly and even affected
the incoming managing director of the IMF in 2002, Horst Köhler. For
Köhler, Argentina was clearly a test-bed for a new approach where lend-
ing decisions would be based on a more general and ultimately political
assessment than in the past. Köhler called for prevention rather than
cure after the crisis in Argentina. As a Brookings Institution briefing
paper put it, “Argentina poses a major problem for the IMF’s economic
advice because it exposes the fragility of the IMF’s economic advice,
and the absence of a technocratic solution to what is essentially . . . a
political problem” (Graham and Masson 2002, 2).
If international capitalism had to deal with a major credibility crisis,
capitalists in Argentina itself found themselves in deep difficulties in
2002. In the first two months of 2002, the textile sector lost over 50
percent of its sales and domestic demand plummeted (Página 12, March
19, 2002). There was a similar collapse of the auto industry and the
metal-mechanical sector. With internal demand collapsing, the credit
system decimated, and imported goods rising rapidly in price, there was
little expectation that the production sector would recover easily. Some
export sectors did benefit from devaluation of the peso, but this only
accentuated uneven development. As one analyst put it, “There is a need
to reconstruct the web of inter-industry relations and thus necessarily a
degree of predictability” (Página 12, March 19, 2002). With the chain
of payments broken by the crisis, there was very little of the predictabil-
ity and trust that capitalism needs if it is to be successfully embedded in
society. Therefore, no dynamic bourgeois leadership is likely to emerge
from this crisis.
80 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

A socioeconomic crisis usually requires a political solution and here

too the prospects of a fundamental restructuring to deal with what is
effectively the collapse of an apolitical economic model seems not to be
materializing. The middle-class Radical Party is in total disarray fol-
lowing the collapse of the de la Rúa government. The parliamentary left
is also tarnished by that collapse and is not cohering as an alternative
pole of attraction. Outside of parliament, the usual array of small parties
vie for popular support, but no real connection with the populist move-
ments is in sight. The Peronists are still the largest political force, but
they are divided and riddled with corruption. The most promising and
popular political figure around is Elisa Carrió, an independent Radical
who has pushed the issue of corruption and the need for a “moral re-
newal” into the foreground. The military are, for the time being, quiet,
and a return to a 1976-style dictatorship seems unlikely. At present, the
turn towards a leftist populism, as in many other parts of Latin America,
seems the most likely outcome.

Prospects

After any crisis come the recriminations. First in the firing line, predict-
ably, was the International Monetary Fund. The left blamed the policies
of the IMF for the crisis, as one would expect, given the long-running
critique of its austerity programs. This time, however, the critique was
much broader from within establishment circles. Thus, Paul Krugman
viewed Argentina’s crisis as a U.S. failure and referred angrily to how
“IMF officials—like medieval doctors who insisted on bleeding their
patients, and repeated the procedure when the bleeding made them
sicker—prescribed austerity and still more austerity, right to the end”
(Krugman 2002). Likewise, Jeffrey Sachs declared in despair that “The
IMF lacks a clear idea about what to do in Argentina,” and, instead of
addressing the real causes of the crisis, “recommends antiquated and
phony solutions” (Sachs 2002). From the perspective of capital’s or-
ganic intellectuals, the crisis in Argentina compromised the credibility
and viability of the IMF as key international capitalist institution.
The IMF itself has mounted a fairly weak and inconsistent defense of
its record in Argentina. Thus, Anne Krueger, first deputy managing di-
rector of the IMF, seeks the reasons for Argentina’s “sad decline” as
though the IMF had never been involved in the country’s decade-long
religious observation of its rules. Krueger finds that the “external envi-
 FALL 2001 81

ronment and shocks were unfavorable” and that “unsustainable debt

dynamics were left unaddressed” (Krueger 2002). Both are true state-
ments but are not unconnected with IMF policies. Furthermore, Krueger
argues in terms of the central convertibility strategy that “with hind-
sight, an earlier exit to a more flexible exchange rate would clearly have
been preferable” (Krueger 2002). Again true, but hardly IMF policy at
the time. While Krueger notes sadly that “[t]ime is not on Argentina’s
side,” IMF officials in Argentina continue to practice what they call “tough
love” and insist on a “colonial governor” style which has angered even
conservative politicians; they also insist that more austerity must be prac-
ticed by the people, especially in the provinces which are already on the
brink of economic and social collapse.
Perhaps one of the most important lessons to be derived in relation to
the role of the IMF is the need to go beyond denunciation to articulate a
viable alternative strategy. One element would necessarily focus around
the growing international campaign to see an orderly and transparent
restructuring of Argentina’s debt that could be overseen by global civil-
society bodies (see Jubilee Plus 2002). To make the market socially
accountable is probably necessary just to resolve the current crisis in
Argentina. An alternative strategy would also strive for macroeconomic
stability but base it on the expansion of government revenues (through a
proper taxation system, signally absent in Argentina) to provide fiscal
balance (see McEwan 2002). It is widely accepted in Argentina that the
privatization program of the 1990s will have to be reviewed. Exchange
controls will probably have to be introduced and the state will undoubt-
edly regain a more active role in production. The social economy—
which has developed as a response to the crisis—may well expand and
consolidate its role in the years to come.
While clearly the international financial agencies—and the very re-
gime of free global financial markets—can be seen as the main agents
of Argentina’s collapse, this should not distract us from a class analysis
of what is happening in Argentina today. For a start, corruption became
endemic during the Menem decade to such an extent that internal Peronist
politics are now almost entirely based on patronage and accessing the
spoils of office. Short-term thinking is also characteristic of the political
and business worlds to such an extent that any long-term strategizing is
almost impossible. There is a local expression to characterize this nega-
tive Weltanschauung that refers to the ethics of viveza (translated roughly
as smart aleck rather than clever). The free-rider ethic has prevailed and
82 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

to some extent fed into the causes of the current crisis. Ironically, there
is now a much more reflexive and self-critical tone in debates within
Argentina where it is dramatically recognized that things cannot con-
tinue as in the past.
Alain Touraine, critical international sociologist who is very know-
ledgeable about Argentina, was self-admittedly “brutal” in his analysis
of the 2001–2002 collapse of the country. For Touraine, the biggest prob-
lem today is “the decomposition of the political class and the decompo-
sition of the will to be” (Touraine 2002, 1). In fact, for Touraine, Argentina
was sheltered by the IMF from a full recognition of the decomposition
that was occurring. The “easy money” of the 1990s, the failure to pay
taxes, corruption rather than competitiveness, all led inexorably to a
collapse. The IMF loans only staved off the inevitable. For cultural critic
Beatriz Sarlo, the “sweet money” (plata dulce) of the 1990s was based
on a denial of the dictatorship’s horrors, a “moral defeat” that has had a
huge and lasting impact on the country’s psyche (Sarlo 2001). Alfonsín’s
symbolic trials of military leaders (later pardoned by Menem) were seen
as sufficient acts of contrition for the past, and the country then launched
itself into the moral vacuum of the neoliberal era.
If a solution from above is not visible on the horizon, what about a
solution from below—that is, from the growing, if amorphous, social
movement organizing against the impact of the crisis and those it holds
politically responsible for it? Through the 1990s, popular protest against
neoliberalism built up across the country. Particularly during the hyper-
inflationary periods of 1989 and 1990, there were widespread lootings
of supermarkets in working class areas. The typical ollas populares (com-
munal kitchens) reappeared in these areas, as the level of unemploy-
ment began to rise dramatically once again. There were genuine popular
uprisings in the poorer provinces, such as the Santiagazo (in Santiago
and Estero, a poor northern province), that showed, in retrospect, how
the national revolt of December 2001 would manifest itself. The most
widespread working-class (unemployed on the whole) forms of protest
were the roadblocks across major highways up and down the country
from the mid-1990s onwards (see Dinerstein 2001). These roadblocks,
and the piqueteros (picketers) who organized them, represented an em-
bryonic popular power that was contesting the legitimacy of the domi-
nant political economy. Until the end of the decade, though, they appeared
to be rather isolated.
With the deepening of the social and economic crisis at the end of
 FALL 2001 83

2001, a very different social actor came onto the scene, namely the
country’s once sizeable and prosperous middle class. Small-scale sav-
ers had been hit hardest by the collapse of the currency and the freezing
of bank accounts (the famous corralito). “Pots and pans” demonstra-
tions became the protest mode of the Chilean right against Salvatore
Allende in 1972–73, but they had also been used across the southern
cone of Latin America during protests against the military dictatorships.
The middle class was now clearly at the center of the protest, but it also
willingly united with an already mobilized working class. This led to
the spontaneous insurrection against the government on December 19,
2001. Characteristically, this mobilization totally obscured a general
strike called that day by a fairly tame trade-union movement (except for
one radical sector allied with the piqueteros), which represented a small
section of the working class, one that had been somewhat sheltered from
the worst effects of the recession to date.
As the crisis came to a head, the struggles of the workers and the
middle sectors came together under the slogan “piquete y cacerola: la
lucha es una sola” (picket and saucepans, the struggle as one). Whether
this was or is an organic and durable class alliance is hard to tell, but it
did reinvent the “popular” in Argentina in a way not seen since the hey-
day of Peronism. What it led to in the months following the collapse of
the de la Rúa government at the end of 2001 was a remarkable, sponta-
neous emergence of neighborhood assemblies. The asambleas barriales
were often organized around practical issues like the distribution of food,
but they also represent an open public space for deliberation in a mo-
ment of crisis. They are recovering part of the traditional sense of com-
munity lost during the rampant individualism of Menem’s naked
neoliberalism. The asambleas are part of the restructuring of a civil so-
ciety faced with a weak and illegitimate, but still threatening, state, as
the people move from communication to action on a whole range of
fronts.
The most far-reaching demand to emerge in 2002 was a simple, prac-
tically nihilistic “Que se vayan todos” (they should all go), referring to
the country’s politicians. This is a radical slogan expressing a total re-
jection of the partisan opportunist and self-serving political parties (and
that includes most of the left) that have led Argentina into the current
cul de sac. It is also clearly a protest and not a proposal for change, a
negative rejectionist stance that is not designed to produce viable strat-
egies to overcome the crisis. It has, however, served well to capture the
84 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

genuinely cataclysmic moment Argentina is living through. The future

can only be uncertain, as Horacio González writes:

It is very difficult to imagine the Argentina to come. I see it as stormy and

tumultuous. . . . I see a disintegrated country with local currencies. A
country with no associative relations, no state form . . . a political class
questioned absolutely but no conditions for replacing it by something we
could be more enthusiastic about. (González 2002, 336)

It is possible that this article will be dated by the time it appears, but I
somehow doubt that the crisis in Argentina will find a rapid solution.
There is one radical solution being advocated by Rudi Dornbusch (with
Chilean economist R. Caballero) that is reminiscent of nineteenth-cen-
tury imperial customs receiverships, namely that, “Because Argentine
polity has become overburdened, it must temporarily surrender its sov-
ereignty on all financial issues” (Caballero and Dornbusch 2002, 2).
Given that the country is bankrupt and has a “dysfunctional society,”
Dornbusch is calmly advocating that “Argentina now must give up much
of its monetary, fiscal, regulatory and asset management sovereignty for
an extended period, say five years” (Caballero and Dornbusch 2002, 2).
That this suggestion was not immediately and universally seen as bi-
zarre gives some indication of the depth of collapse in Argentina. Ev-
erything has changed since December 2001: the political economy of
collapse is now a prime example. The future of neoliberal globalization
is at stake here as well as the social and economic well-being of the
people of Argentina.

Postscript

The influential London weekly The Economist, in a recent bleak survey

of “capitalism and its troubles,” declared that “Argentina’s problems
have already dealt a serious blow to the idea that the global triumph of
capitalism is inevitable” (The Economist 2002b). Argentina’s crisis is
bracketed along with the Enron scandal and international terrorism as
symptoms of a broader crisis of capitalism and the end of what might be
called the easy phase of globalization. The Economist still declares it-
self optimistic, labeling Argentina’s collapse as an indictment not “of
economic liberalization, but of specific macroeconomic failures” (The
Economist 2002a), but the global implications of Argentina’s implosion
are evident enough. Early in 2003, after a year’s negotiations with
 FALL 2001 85

Argentina’s interim government, the IMF finally announced that a US$6.6

billion debt rollover had been agreed upon. There was little sign within
the IMF, however, that an end to the financial crisis and a resumption of
growth in Latin America was foreseeable (see IMF Survey 2003). In
fact, many sober analysts were using the case of Argentina to argue
persuasively for more sustainable and dynamic economic prospects for
Latin America outside the parameters of the IMF and the dominant form
of neoliberal globalization (see Ciblis, Weisbrot and Kar 2002). The
crisis in Argentina will probably be see in retrospect as significant for
the future of capitalism and the collapse of the Berlin Wall was for the
future of socialism.
In Argentina itself the impact of the crisis could not be underesti-
mated as the country moved into national elections in May 2003. Quite
simply Argentina was not the same country that began the move to-
wards democracy in 1983 amidst widespread optimism that a ‘Euro-
pean’ style political economy could be constructed. While there was a
relative economic upturn with the unfreezing of bank deposits and the
end of the corralito, there was considerable political apathy and an un-
precedented degree of political fragmentation. There were three Peronist
candidates: Néstor Kirchner (a relatively progressive provincial gover-
nor supported by outgoing interim President Duhalde), Adolfo Sáa (one
of the interim presidents in December 2001) and, incredible though it
seemed, ex-President Menem. From the discredited and demoralized
Radial Party came Ricardo López Murphy with an openly reactionary
agenda to deal with the severity of the crisis. As an outsider but growing
in popularity there was Elisa Carrió who focused on the corruption of
the ‘mafiosos state’ and most politicians. The two front runners, Kirchner
and Menem were due to go to a second round but Menem dramatically
and decisively refused to go forward and faded from the political scene.
So, unfortunately, did Carrió and López Murphy was left to carry the
conservative Menemista flag. Kirchner has surprised many observers with
the firm way he has dealt with the IMF and the reactionaries at home, thus
reviving the progressive national-popular Peronist tradition of Peronism.
While Menem had gone into the elections committed to a full
“dollarization” of the economy, Kirchner put forward a neostructuralist
strategy based on a more industrializing and developmentalist perspec-
tive. The left held on to the City of Buenos Aires in a critical electoral
struggle for Kirchner later in the year. The mood was one of political
realism and Kirchner reflected the general disenchantment with tradi-
86 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

tional politics in Argentina. But quite what sort of country was being
(re) built was not quite clear. There were no alternative models nor past
ones to call on. Political realism had become a rather deep pessimism
despite the relative economic upturn and political restabilization. What
was missing was even a minimal vision equivalent to Lula’s hope that at
the end of his mandate every Brazilian would have a meal a day.
The elections in Argentina in 2003 were of course followed closely in
neighboring Brazil where President Inacio “Lula” da Silva was com-
pleting his first 100 days in office with a strengthened economy and
record approval rates. While facing considerable criticism from the left
within his own Workers’ Party, “Lula” has managed to calm the “mar-
kets” that were deemed jittery in the lead-up to the elections in 2002.
The IMF, fearful of the international repercussions of debt default in
Brazil following the one in Argentina, had already agreed on a record
loan of US$30 million in 2002. However, the IMF conditions, including
a demand for a strong budget surplus, make it unlikely that Brazil’s new
government will be able to meet its commitments to reactivate the
economy and deal with the country’s massive levels of socioeconomic
inequality. While this is undoubtedly a competent, and in many ways pro-
gressive, government (especially in its independent foreign policy at a
critical world juncture), its freedom of action is seriously constrained.
None other than Domingo Cavallo, Menem’s and later de la Rúa’s eco-
nomic czar in Argentina, has warned that “Lula will end up like de la Rúa”
(Nudler 2003), given the unsustainable dynamic of the foreign debt and
high interest rates. Cavallo warns, from experience, that political capital
can be exhausted in a vain attempt at continuous fiscal adjustment.

Bibliography

Abbott, D. 2002 “Argentina Shows the Reality of Globalisation.”

www.poptel.org.uk/scgn/articles/0201/page5.htm.
Becerra, L., et al. 2002. “Argentina: An Alternative Proposal to Overcome the
Crisis.” Monthly Review 53, no. 11. www.monthlyreview.org/0402becerra.htm.
Caballero, R., and R. Dornbusch. 2002. “Argentina: A Rescue Plan That Works.”
Calloni, S. 2002. “Las asambleas populares. El susurro de la resurección de un
pueblo.” In Qué Son las Asambleas Populares, ed. R. Bielsa et al., pp. 16–21.
Buenos Aires: Peña Lillo.
Canitrot, A. 1991. “Programas de ajuste y estrategias políticas: Las experiences
recientes de la Argentina y Bolivia.” Desarollo Económico 31.
Caparrós, M., ed. 2002. Qué País. Informe Urgente Sobre la Argentina Que Viene.
Buenos Aires: Planeta.
 FALL 2001 87

Ciblis, A., M. Weisbrot, and D. Kar. 2002. Argentina Since Default: The IMF and
the Depression. Centre for Economic and Policy Research. www.cepr.net/
argentina_since_default.htm.
Dinerstein, A. M. 2001. “Roadblocks in Argentina.” Capital and Class 74: 1–7.
———. 2003. “Popular Insurrection and the Asambleas Barriales in Argentina.”
Bulletin of Latin American Research 22(2), pp. 187–200.
Felix, D. 2001. “After the Fall: The Argentine Crisis and Possible Repercussions.”
Foreign Policy Focus (December). www.fpif.org.
———. “The Argentine Crisis as Coup de Grace?” Foreign Policy Focus (Sep-
tember). www.fpif.org.
Gabetta, C. 2002. “Crise Totale en Argentina.” Le Monde Diplomatique (January).
www.monde-diplomatique.fr.
González, H. 2002. “Perspectivas: Las mil y una noches” In Qué País. Informe
Urgente Sobre la Argentina Que Viene, ed. M. Capparros, pp. 336–42. Buenos
Aires: Planeta.
Graham, C. and P. Masson. 2002. “The IMF’s Dilemma in Argentina: Time for a
New Approach to Lending?” Brookings Institution Policy Brief, No. 111
(November).
Halevi, J. 2002. “The Argentine Crisis.” Monthly Review 53(11) (April).
IMF Survey 32(2). 2003. www.imf.org/imfsurvey.
Jubilee Plus. 2002. It Takes Two to Tango—Creditor Co-responsibility for the
Crisis in Argentina. www.jubileeplus.org/argentina.
Krueger, A. 2002. “A Crisis Prevention and Resolution: Lessons from Argentina.”
www.imf.org.
Krugman, P. 2002. “Argentina’s Crisis Is a U.S. Failure.” New York Times
(January 2).
Leader. 2002. “Make the Break. Changes Would Boost IMF Effectiveness.”
Guardian (January 19). www.guardian.co.uk.
Lewis, C. 2002. Argentina: A Short History. Oxford: One World.
McEwan, A. 2002. “An Economic Debacle in Argentina: The IMF Strikes Again.”
Foreign Policy Focus (January). www.fpif.org.
Munck, R., R. Falcon, and B. Galitelli. 1987. Argentina: From Anarchism to
Peronism. London: Zed.
Munck, R. (Ed.). 1997. “Argentina Under Menem.” Special Issue, Latin American
Perspectives 24(6).
Nudler, J. 2003. “Lula terminará como de la Rúa.” Pagina 12 (March 16).
Ollier, M. M. 2003. “Argentina: Up a Blind Alley Once Again.” Bulletin of Latin
American Research 22(2), pp. 170–86.
Pearson, R. 2003. “Who Are the Participants in the Real Global de trueque?”
Bulletin of Latin American Research 22(2): 214–30.
Powell, J. 2002 “Petty Capitalism, Perfecting Capitalism or Post-Capitalism?
Lessons from the Argentinian Barter Network.” Working Paper Series 357. The
Hague: Institute of Social Studies.
Rock, D. 2002. “Racking Argentina.” New Left Review 17 (September–October):
55–86.
Sachs, J. 2002. “IMF ‘Cure’ Is Adding to Crisis in Argentina,” Irish Times (May 4).
Sarlo, B. 2001. “Hay un país llamado Argentina?” El sitio de Punto de Vista.
www.bazaramericano.com.
88 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY

Tedesco, C. 2001. “Between Democracy and Neoliberalism: Conceptualising the

State in Argentina.” Paper presented at Latin American Studies Association
conference, Washington, DC.
Teran, O. 2002 “La experiencia de la crisis.” El sitio de Punto de Vista.
www.bazaramericano.com.
The Economist. 2002a. “Is It at Risk? Globalisation.” The Economist (February 2).
–––––. “Survey: Capitalism and Its Troubles.” The Economist (May 18).
Touraine, A. 2002. “Su problema es que no sepusieron a trabajar.” (January 21).
http://pagina12.feedback.net.ar.
World Bank. 2002. Poor People in a Rich Country. A Poverty Report for Argen-
tina. Poverty Reduction and Economic Management Programme. Geneva:
World Bank.

Newspapers

Clarín (www.clarin.com)
Financial Times (www.news.ft.com/home/uk)
Guardian (www.guardian.co.uk)
Página 12 (www.pagina12.net.ar)
Sindicato Mercosul (www.sindicatomercosul.com.br)

The following Statement of Ownership, Management, and Circulation is provided in ac-

cordance with the requirements contained in 39 USC 3685. International Journal of Politi-
cal Economy (Publication no. 0891–1916) appears quarterly and the annual subscription
price is $785.00. It is owned, managed, and published by M.E. Sharpe, Inc., which is
located at 80 Business Park Drive, Armonk, Westchester County, NY 10504–1715. The
Publisher is M.E. Sharpe, at the same address. The Editor is Paul Mattick and Managing
Editor is Patricia Kolb, M.E. Sharpe, Inc. 80 Business Park Drive, Armonk, NY, 10504.
During the preceding twelve months the average number of copies printed for each issue
was 400; the average paid circulation (by mail subscription) was 223; the average free
distribution, 12; the average number of copies distributed, 235. Corresponding figures for
the issue published nearest to the filing date: total number of copies printed, 400; total
paid circulation (by mail subscription), 235; total free distribution, 12; total distribution,
247. Filed by Vincent Fuentes, Senior Vice President.