Message-ID: <>
Date: Sat, 2 Aug 1997 23:41:54 -0400
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: Raymond Chase <r_chase@AXESS.COM>
Subject: FWD: Reflections on Globalization: The Case of Argentina

Reflections on Globalization: The Case of Argentina

By Martha E. Gimenez. 2 August, 1997

A post which appeared on the progressive sociology café.

Raymond Chase

Dear PSNers,

I spent the month of June in Argentina where, besides visiting my family, I was able to witness once again the effects of market rule free from any government efforts to ameliorate its effects upon the population. Military dictatorship has effectively been replaced by market dictatorship under the cloak of formal democracy; the latter is more effective because it appears that whatever happens is beyond the control of those in power. In fact, politicians and technocrats present themselves as full of good intentions, but powerless to change the impersonal exigencies of the global economy.

I had the opportunity to meet with the Secretary of the Treasury, whom I had met in the late 1980s during his brief stay in Boulder as an assistant professor of Economics in the late 1980s. With unemployment hovering near 20%, the Washington-Buenos-Aires-consensus is that Argentina's extensive privatization program will draw the unemployed back into the work force.

MONEY: A centerpiece of Argentina's economic program since the neoliberal takeover in 1989 is the Convertibility Law of April 1991. Rather than the central bank and Treasury governing exchange rate policy, an exchange rate of one-to-one with the dollar is fixed by law and the central bank is required to hold 100% reserves -- every peso from the central bank is backed by a dollar of liquid assets like US Treasury notes. When Mexico devalued in December 1994, speculators turned their attention to another indebted country, Argentina -- there was a massive capital outflow as speculators bet on another devaluation. Since the peso is fixed to the dollar by law and since the central bank had 100% dollar backing to their peso monetary liabilities, the Argentine authorities could not devalue even if they had wanted. But the result was an enormous decline in money (peso deposits), ie, a tight monetary policy that resulted in 20% unemployment in 1995. Capital is now once again flowing back into Argentina but the word on the street is that a large proportion of it is not the investment capital so extolled by the IMF but drug money being laundered by, for example, investing in new hotels or purchasing insurance companies.

Talking with friends and reading the newspapers, I got the impression that there is very little that remains to be privatized, that very little of value remains in private hands; even highways and freeways have been privatized to a large extent and, at the time I left (end of June) the privatization of the Post Office and the airports were being considered. Privatization may increase productivity and profits, but it does not increase employment; on the contrary, it brings downsizing and unemployment. Income polarization is higher than ever and the middle class is withering away even faster than the State, which has laid off hundreds of thousands of workers and limits its activities to that of managing the interests of local and foreign investors. The State follows to the letter the policies dictated by the IMF; to reduce public spending, to reduce employers' contributions to workers' social security, privatization of social security, and flexibilization of the labor contract (meaning that workers could be fired whenever employers wanted without legal recourse, an increase in the demand for part-time, contingent workers, and an increase in the length of the working day, from 8 to 12 hours). While some unions are resisting and full "flexibilization" of the labor contract has not yet happened, I do not doubt it will become law in the near future. Presumably, this would reduce the cost of labor to an acceptable level and would have the effect of increasing the demand for labor or at least reducing the number of lay offs, thus reducing unemployment.

These reductions in the standard of living of workers and projected negative changes in their working conditions are presented as tools to achieve competitiveness in a situation in which there are no barriers to the circulation of capital, so that if labor costs are high, capital will simply go elsewhere and the entire economy will suffer. The problem is, of course, that a healthy economy under these conditions does not necessarily mean a good standard of living for the average person. On the contrary, while the economy is supposed to grow at a rate of over 7 percent this year, this benefits only the capitalist class, its political and technocratic supports, and the tiny proportion of the population connected in one way or another to the "modern" sector. The rest of the country is mired in poverty or near poverty, though in most provinces it is possible to identitfy, of course, a "modern" elite, connected to the enterprises that link the provinces to the global market.

The government's hands-off policy rests on the assumption that each province's government must cooperate with its productive sectors to create opportunities for provincial economic growth. And, as the secretary of the Treasury told me, when the sources of employment in a community disappear because of privatization, people should migrate to areas where there might be new employment opportunities. But it is difficult to identify such areas. Several provinces are in the midst of an"export boom;" but their exports go mainly to MERCOSUR (an economic union formed by Brazil, Argentina, Paraguay and Uruguay) and are mostly primary products, produced by foreign owned corporations exploiting natural resources. Though provincial exports have grown over a hundred percent in several provinces (and over 200 percent in a couple of them) in the last three years, those very provinces are among the poorest in the nation. The pattern of wealth concentration at the top accompanied by the collapse of the middle sectors, the growth of unemployment and the increase in the numbers of the poor and near poor characterizes the the country as a whole as well as the provinces some journalists compare to the Asian export led economic "miracles" and call "little tigers." And those provinces where there is mainly deindustrialization are even worse off.

I remember, when reading modernization theory years ago, one encountered those stark descriptions of the "modern" and the "traditional" sectors. It is shocking to see this division in a country which, until relatively recently, had a broad middle strata and was quite prosperous in comparison to most Latin American countries. Visiting Argentina I was struck by the deep chasm between the people linked to the global economy through education and employment, affluent enough to partake at least a little of the prosperity for the few these economic policies are producing, and the rest of the country, still dependent on the old productive and retail strategies. The country has been invaded by American and European capital investing in mega-stores (e.g., Wal-Mart, Carrefour) which are forcing hundreds of thousands of small retailers into bankruptcy.

There are no opportunities for those who lack the knowledge and credentials to find a place in the new economy. What is happening in Argentina is not unique; similar processes occur in most countries of the world today. I saw recently a documentary called, I believe, The Future of Work, in which Jeremy Rivkin's book, The End of Work, was discussed. If the new "information civilization" (as he called it) is capital intensive and likely to employ about 20 percent of the potential labor force, what will the rest of the people do? The decline in the opportunities to become a waged or salaried workers engaged in the production of commodities might lead to the growing collective awareness of the economic importance of useful, unwaged labor and its contribution to people's well being and satisfaction of needs outside market relations. I figure it is time to dust off our copies of the Grundrisse and read it again!

This is altogether long and I don't have an answer to that question - but perhaps we could exchange ideas and start thinking of the political implications of these drastic world changes.

In solidarity


Martha E. Gimenez
Department of Sociology
Campus Box 327
University of Colorado at Boulder
Boulder, Colorado 80309
Voice: 303-492-7080
Fax: 303-492-5105

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