You have reached iGreens.org.uk. In December 2006 we moved to iGreens.org with faster servers and discussion boards. Click here to follow us.
|
You have reached iGreens.org.uk. In December 2006 we moved to iGreens.org with faster servers and discussion boards. Click here to follow us. |
|
In
the spring of 1940, a middle-aged Argentine Army officer named Juan Domingo Perón
took a Cook's tour of Europe. Although the Second World War had just broken out,
Argentina was officially neutral, so Perón travelled freely across the
continent. What impressed him most was the spectacle of German organization. For
Perón, Nazi Germany was a model of true popular democracy, where the people
worked for the nation's good with lockstep efficiency. When Perón orchestrated
a coup and became the President of Argentina, in 1946, he believed that his
country, like Germany, could become "an enormous machine that functioned
with marvellous perfection, where nothing—not even a tiny screw—was
missing." Half a century
later, nothing in Argentina seems to function at all. After four years of
recession, its economy is on the brink of collapse. It has defaulted on its
foreign debt and endured deadly riots. Not surprisingly, in the absence of a
clear or simple fix, the turmoil has inspired a longing for the good old days.
Argentina's newest President—its fifth in two weeks—is a leader of the Perónist
Party, and his supporters chanted "Viva Perón!"
as he was elected by the Argentine Congress. Perhaps it makes sense that in a
time of chaos people should cling to Perón's dream of "a perfectly
organized community and a perfectly organized people." But it's this very
dream that helped cripple Argentina. In a successful
modern economy, most of what happens—for good and for bad—is beyond the
government's control. Alan Greenspan can cut interest rates, but he can't
actually make anyone invest. For Perón, with his rage for order, such
uncertainty was intolerable. A machine must operate according to fixed
principles. So Perón made the government the Argentine economy's chief
operator. He nationalized grain elevators, public utilities, and railroads, and
decreed that no bank could make a loan without first getting government
approval. Under Perón, the government not only controlled prices and wages but
interfered in daily life in bizarre ways; at one point, for example, to
encourage beef exports Perón declared that for two days each week Argentines
must go without meat. Perón's policies
failed. Growth slowed and inflation skyrocketed, because the government kept
printing money to pay for its schemes. In 1955, Perón was toppled in another
coup. An economy, it turned out, is not a steam press. But Perón's successors
failed to recognize this; although they disagreed with many of his dictates,
they felt that in general it was necessary to dictate. And so Argentina spent
the next thirty-five years embracing just about every faddish theory of economic
development. Each time a new leader came to power—the country had eighteen
different Presidents between 1955 and 1990, including Perón again—Argentina's
economic policy changed. Each new leader declared that the right solution had
been found. Isolationism, developmentalism, new currencies, wage-and-price
freezes, huge loans from foreign banks: Argentina tried them all. It was the
place where bad ideas went to die. Yet its leaders remained in thrall to
top-down solutions. As the historian Paul Lewis wrote, "Argentine
policymakers seldom consulted with anyone. The usual method was to elevate some
prestigious economic 'wizard' to head the Ministry of Economy, where he
exercised almost dictatorial powers." All this wizardry
was devastating. In trying to eliminate uncertainty, the state only fostered it.
Because companies couldn't be sure what dubious scheme the government might
resort to next, they shied away from long-term investments. Workers, fearful
that inflation might eat up their earnings, made relentless demands for higher
wages. Corruption flourished in the legislature, further eroding people's faith
in the economy. In 1938, Argentina was a developed country; its economy was
bigger than Italy's or Japan's, four times the size of Brazil's. Today,
Argentina is firmly in the ranks of the Third World. No other country has fallen
so far. The economy
improved in the nineteen-nineties, when the state scaled back its role, fostered
entrepreneurialism, fought corruption, and opened Argentina to the world market.
What didn't change, though, was the old faith in magical cures. In the last
decade, the problem was inflation, and the cure was the pegging of Argentina's
currency to the U.S. dollar. For a while this worked, but, as the economy
slowed, the arrangement backfired. It kept interest rates too high and crippled
exports. The conditions had changed, yet the wizards of the hour—including the
International Monetary Fund and American hard-money economists—insisted that
Argentina had to keep the peso-dollar peg. The certainty of debt default and
bank failure was apparently preferable to the uncertainty of currency
fluctuation. Not until last week, after a month of paralysis, did Argentina
finally devalue the peso. A machine does not
change over time. It may need to be lubricated, and worn-out parts may have to
be replaced, but in essence it stays the same. This, unfortunately, is not how
economies work. A healthy economy changes all the time. New functions are added,
old ones are dropped. Parts that were once tremendously valuable become
irrelevant. Government policy that fits one set of circumstances might be
unsuited to another. As a procession of generalissimos and I.M.F. gurus have
discovered, economies are unruly and disobedient. The more you try to tell them
what to do, the less likely they are to listen. James Surowiecki. Reprinted from The
New Yorker Jan 14th 2002 |
|
You have reached iGreens.org.uk. In December 2006 we moved to iGreens.org with faster servers and discussion boards. Click here to follow us.
Send mail to enquiries@igreens.org.uk
with
questions or comments about this web site.
|