December 28, 2004
Free Market Miracle #0012
When the Argentine economy collapsed in December 2001, doomsday predictions abounded: Unless it adopted orthodox economic policies and quickly cut a deal with its foreign creditors, hyperinflation would surely follow, the peso would become worthless, investment and foreign reserves would vanish and any prospect of growth would be strangled.
But three years after Argentina declared a debt default of more than $100 billion, the largest in world history, the apocalypse has not arrived.
Instead, the economy has grown by eight percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning, and unemployment has eased from record highs -- all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.
Note that those "standard measures" are in large part responsible for the poverty-related deaths of 30,000 children worldwide, every single day.
Saving 30,000 niggers' lives may be all well and good, one may say, but shouldn't countries pay off their debts? Not really. The Third World debt is largely a political construct: the debts were incurred when monies were loaned to un-elected governments (often for weapons with which to beat down their populations). Then when interest rates were dramatically (and unilaterally) increased in the early-'80s, the debts skyrocketed.
Most countries have, in fact, paid out a far greater sum in debt service than was originally borrowed, without (owing to the onerous interest rates) actually touching the principle!
This sort of situation is known as "odious debt" in the lingo, and the United States has used the concept of odious debt to argue that Iraq's debts (but not the rest of the Third World's) should be written off. Convenient, isn't it? The United States itself has written off 100% of Iraq's debt to the U.S..
"Lifting the crushing burden of the old regime's debt is one of the most important contributions we can make to Iraq's new beginning," according to Colin Powell. Try asking him whether writing off the rest of the Third World debt could make an "important contribution" it its "new beginning".
So, all together now: "Fuck the IMF...Fuck the IMF...Fuck the IMF..."
And why shouldn't other countries follow Argentina's lead?
Traditional free-market economists remain skeptical of the government's approach. While acknowledging there has been a recovery, they attribute it mainly to external factors rather than the policies of President Nestor Kirchner, who has been in office since May 2003. Increasingly, they also maintain that the comeback is beginning to lose steam.
"Traditional free-market economics" is more religion than science. But, funny thing: poor people would rather eat than pray. Almost the whole of South America is on open revolt over the IMF's strictures. And with the U.S. military bogged down in Asia, and with the greenback in virtual free-fall, there's not a whole hell of a lot the Bush Administration can do about South America's nose-thumbing.
Update, 1/5/05: Satire lives! Check out Andre Gunder Frank's "The Naked Hegemon".
Posted by Eddie Tews at December 28, 2004 05:05 PM
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