Thursday,Mar 17 2005, 04:36:02 PM20 MONTHLY REVIEW / SEPTEMBER...

20                MONTHLY REVIEW / SEPTEMBER 2004 –ARGENTINA

– Economy and Social Democratic Proposals

… the economy has now recovered with dazzling incomes for the enriched minority. But the afflictions of the majority have not been reversed and have even dramatically worsened for many.

 

Official statistics indicate that 60 percent of the population lives below the poverty line, 20 percent are unemployed, and 44 percent of those working have only informal, temporary, and very low-paying jobs. Government officials affirm that "the social agenda is pending," but they don't say when it will come about. In fact, they expect, without any foundation, a long-term recovery of employment and salaries. They are betting on continued support from what, for all their efforts, would be several poverty-stricken generations resigned to a miserable fate.

 

We find this resignation unacceptable. This is the reason why, instead of celebrating the capitalists' benefits and hiding the people's sufferings, we propose a program based on the immediate recovery of the purchasing power of workers, the unemployed, pensioners, and other popular sectors. This plan is based on three pillars: the funds now placed in service of the public debt, a progressive fiscal reform, and an extraordinary tax on recent exceptional gains attained by big business groups.

 

Universal Grant for Food and Education

The first measure for a popular economic plan is to put into practice without delay a universal plan to offer food and education to all the population. The monthly cost of a basic basket of food for a two-child family is officially estimated to be 327 pesos (us$113). A guarantee of this minimum right to the entire population has to be the first step for any project aiming to reverse the social disaster. This amount should be complemented with a 45 peso (us$15.50) allowance for each child to make it possible for families to pay the basic costs of education.

To establish this subsidy-which many organizations argue should be around 380 pesos-it is vital to make the "right to live" a reality. To eat every day is a fundamental right, and it cannot be made to depend on the contingency and uncertainty of employment. This undisputable basic right must be assured through a universal subsidy. The absence of this right in a country such as Argentina-the fifth leading food exporting country-is particularly reprehensible.

 

Implementation is urgent, because, since the big devaluation in December 2001, prices have risen 46.7 percent and family food product prices have gone up by 74.9 percent. It is estimated that 35 percent of the population is not getting enough food. Worse yet, experts are detecting a new generation of "socially caused small persons," meaning people whose height has decreased compared with prior generations because of the cumulative effects of malnutrition.

 

The grant could make possible the immediate elimination of the indigent state of 25 percent of the population and should totally replace the existing plan, called the Head of the Family Plan (Plan Jefes y Jefas de Hogar), with a universal system that abolishes the arbitrariness of the existing system. Social insurance must not depend on the goodwill of public officials or the calculations of political bosses.

The government rejects the implementation of this primary right because it gives priority, in the disposition of its growing resources, to paying public debt. In addition, a universal system is not consistent with the system of patronage crucial to the traditional political parties. And finally, official opposition to a universal grant is supported by the employers, who fear that the subsidy could be a serious hurdle to keeping wages and salaries depressed. If all families could be assured of 380 pesos, no one would work for less.

 

To keep a big part of the population in absolute misery is a premeditated aim of business sectors opposed to any recovery in wages. Rightwing sectors are devoting great energy to a campaign against "unemployed vagrancy." The government reflects this pressure and supports a proposed grant of 150 pesos per newly employed worker as a subsidy for those firms hiring unemployed persons. This initiative is supported with enthusiasm by the "free market" champions from the World Bank and is presented as an alternative to the universal subsidy.

 

Any progress toward the universal grant for food and education would be a great victory for the people. The costs of the plan are affordable. If to the actual 2,000,000 beneficiaries of the Head of the Family Plan are added those 900,000 who are registered but not receiving any benefits, 9.5 billion pesos (us$3.275 billion) would be needed yearly to guarantee its total implementation. This should be the real public priority as opposed to insatiable debt payments (12.5 billion pesos), the amount provided to cover losses suffered by the banking sector (20 billion pesos), or the vast subsidies provided openly and covertly to big local and foreign economic groups.

 

Four Ways to Create Genuine Work Alternatives

Although the government had intended to mask the cruel social drama by claiming that the beneficiaries of the Head of the Family Plan are not unemployed, official statistics place the unemployment rate at 21.3 percent. Even during last year's record-breaking recovery, the situation improved just marginally. This is evidence of the feeble relation between employment and GDP growth that is now a worldwide feature of capitalism and that acutely affects Argentina.

A forecast prepared by international Labor Organization (ILO) experts indicates that at least 20 years with strong expansion would be needed to reverse the brutal reduction in employment suffered in the economic depression of 1999-2002. Recovery cycles do not restore employment in a dependent and peripheral economy to the same degree as in a core industrialized economy. The elasticity, i.e., the strength of the relationship, between employment and GDP has noticeably contracted in the last decades of deindustrialization and re-primarization of Argentina.

Neoliberal economists, and some well-paid comfortable "experts" at various Non-Governmental Organizations (NGOs), have argued that an expansion of employment in the "informal sector" counteracts the horrors that have everywhere followed imposition of free market neoliberalism. But the terrible prospect of chronic unemployment cannot be reversed with the simple multiplication of informal undertakings. Even less by an impossible "return to the fields," as Argentina is one of the most urbanized societies in Latin America (over 90 percent live in urban centers). These informal undertakings are desperate (but dignified) survival schemes engaged in by millions of people hoping to offer some little comfort to their families. Even the best of these initiatives, organized as cooperatives, lack the necessary tools, credits, technology, and trade networks, and are strangled by the competition of big firms.

The tragedy of mass unemployment cannot be solved spontaneously. However, the creation of genuine employment alternatives could be achieved, in four different ways:

First, the eight-hour working day should be enforced at all employment levels. Ironically the lack of work suffered by "excluded" sectors is the other side of the coin to the overwork imposed on the "included" sectors. Working hours in Argentina (2,000 hours per year) surpass the average annual hours worked in Europe, Brazil, and Mexico. The strict implementation of the normal maximum eight hours of work could create immediately 900,000 jobs.

Second, a public works plan should be implemented, centered in construction, and financed by the three previously mentioned resources of the popular program (debt, fiscal reform, and emergency tax). The generally agreed estimate is that an expenditure of six billion pesos could mean the creation of 200,000 jobs.

Third, a mechanism should be implemented that requires the expansion of employment in those firms with high profitability. Over many years, and with different programs and administrations, it has been demonstrated that "incentives" to promote employment (such as tax breaks and soft credits) have wasted public funds without improving employment levels. For this reason a radically different course should be followed that links profits to the creation of new jobs. The creation of productive work that meets social needs is a challenge to be met by all of society; it cannot and must not depend exclusively on the self-interest of managers or capitalists. It is unacceptable that sackings are synonymous with efficiency. The aim of any economic process should be the expanded organization of work to meet unmet social needs, and not the destruction of jobs in the name of profit.

Finally, public support should be assured to workers' self-administrated factories and small enterprises. Experts in the Ministry of Social Development estimate that under existing conditions just 20 percent of these projects could survive, as most lack basic resources necessary to face capitalist competition. Nonetheless, in a context of genuine employment expansion these enterprises could play a very positive role.

 

An Overall Improvement of Salaries

The inflation that followed devaluation provoked a general but unequal reduction of real incomes. Informal workers were hurt the most, as their average monthly income is 313 pesos (us$110), and the impact of major hikes in food prices has been terrible. This sector receives miserable wages and is not covered by social security, retirement, or health plans. They are not protected by the laws that govern working conditions and compensation. The world of informal employment that involved 25 percent of the workforce at the beginning of the 1990s is now the fate of 45 percent of all workers. Poverty affects, then, not only the "excluded" but also nearly half of the "included."

To end this situation, it is necessary to force the legal registration of all workers. This step is vital to correct the brutal division of the labor market. Without the incorporation of these workers into the formal universe of social and legal protection, no official measure will have any real effect. The highly publicized announcements of marginal minimum wage increases, absent this step, will continue to reach no more than 20 percent of all workers.

 

The aim of the popular economic program should not be to legalize the existing misery, but to reverse it through a real increase in minimum salaries. The increase should mean an effective floor for all workers. This level cannot remain at the existing 350 pesos (us$121) established by the government. It must be near the 716 pesos (us$247) officially recognized as necessary to cover a basic total basket of goods and services-the lowest amount needed not to be classified as poor. It makes no sense to speak of a "minimum salary" at any lower level.

 

Another sector is composed of formal workers, whose average salaries are estimated nowadays to be 718 pesos (us$248). For them the postdevaluation deterioration was not as harsh as in the informal and excluded sectors; some compensation was granted to them. It is estimated that their wages have fallen around 20 percent since the end of 2001. Meanwhile, during the same period, the benefits of the vast gains in productivity that have been observed in most sectors have been completely absorbed by the employers. Wage costs for firms are at the lowest level since 1990.

Public employees comprise another sector. Their salaries have been kept strictly frozen at the demand of the IMF. The fiscal surplus program was established and maintained with this restrictive condition, unmodified in the face of the unexpected increases in public revenues.

A popular economic program must be centered in the recovery of purchasing power. An immediate 20 percent salary hike in the private sector and 30 percent in the public sector, together with the proposals set out above, would engender a recovery that could cover the whole population.

It is false to claim that "there is no money for everybody." More than enough resources are available if debt payments cease (12.5 billion pesos), a progressive tax reform is introduced, and a tax is levied on recent extraordinary profits.

EDI has also elaborated proposals to cope with other basic aspects of Argentina's economy, such as the situation of privatized firms, the collapse of the private financial sector, the situation in the farming and industrial sectors, the problems of the regional economies, and the need to introduce without delay an investment plan addressed to the decaying basic infrastructure. Our commitment is to study alternatives not only as to what must be done, but also how to do it.

 

A Contribution to the Popular Movements

The current political context in Argentina is very different from that of early 2002, when we put forward our first document (published in English by Monthly Review, April 2002). The country is neither living through an explosion such as that of the end of 2001 nor the gigantic collapse of all economic activity that marked 2002. Nonetheless, the misery and suffering of the majority of the population remains the same, and for this reason our proposals are timely and relevant. The members of EDI have set out to analyze the distinct pattern of each phase of the process that has Argentina in its grip, observing cyclical behavior, the evolution of the productive system, and trade and financial trends.

 

We do not aim to compete with any foundation or consulting firm, to quantify variables, or to make short term forecasts. Our goal is different. We aim to contribute positively to the extensive movements fighting against neoliberalism and capitalism. We gather proposals, programs, and local publications that arise from the popular resistance, and develop their content. Our aim is to transform concepts in programs and local announcements into solid proposals. We seek to offer arguments against fashionable but regressive economic opinion, particularly those presented as "progressive" but justifying exploitation, unemployment, and the degradation of working people.

 

This ideological battle is much more important (and much more complex) now that the governments of Latin America hide their actions with anti-neoliberal rhetoric, though maintaining the same basic anti-popular political, social, and economic models. As economic free-market orthodoxy has lost leverage, heterodox ideas have taken their place continuing to justify the status quo as inevitable, natural, and without alternative. The members of EDI reject this naturalization of misery and openly oppose those economists who are applauding the existing course. We continue to promote debate of those measures that could make possible economic reconstruction in favor of the popular majority.

 

This is a favorable moment to advance this project because the dominant classes have partially restored political stability and economic growth but have not been able to deactivate social protest. A new movement to battle for basic social change based on labor, the unemployed (piqueteros), and the parties of the left is today a vital and real possibility. We present this document of the Economistas de Izquierda as a contribution to the elaboration of a common economic program.

Signed by Luis Becerra, Jose Castillo, Eduardo Crespo, Alfonso Florido, Guillermo Gigliani, Eduardo Lucita, Claudio Katz, Jorge Marchini, Andres Mendez, and Pedro Resels --  Buenos Aires, April 2004

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