Resolving the Argentine Paradox: Politics and Development, 1966-1992 9781685856434

Table of contents :
Contents
Illustrations
Foreword
Acknowledgments
Introduction
1 The Crisis of Argentine Political Economy and the Breakdown of Corporatism, 1966-1989
2 Onganía and the Industrial Alliance, 1966-1973
3 Juan Perón and the Populist Alliance, 1973-1976
4 Videla and the Liberal Alliance, 1976-1983
5 Alfonsín and the End of the Breakdown, 1983-1989
6 An Overview of the Breakdown of Corporatism
7 The Menem Presidency and the Break with the Past
Appendix A: Presidents and Ministers of Economics, 1966-1992
Appendix B: Interviews
Bibliography
Index
About the Book and Author

Citation preview

Resolving the Argentine Paradox

Resolving the Argentine Paradox Politics and Development, 1966-1992

Davide G. Erro

Lynne Rienner Publishers

•

Boulder & London

Published in the United States of America in 1993 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, C o l o r a d o 80301 and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London W C 2 E 8LU © 1 9 9 3 by Lynne Rienner Publishers, Inc. All rights reserved

Library of Congress Cataloging-in-Publication Data Erro, Davide G „ 1 9 7 0 Resolving the Argentine paradox : politics and development, 1 9 6 6 - 1 9 9 2 / by Davide G. Erro. p. cm. Includes bibliographical references and index. ISBN 1-55587-369-3 (alk. paper) 1. A r g e n t i n a — E c o n o m i c c o n d i t i o n s — 1 9 4 5 - 1 9 8 3 . 2. A r g e n t i n a — Economic c o n d i t i o n s — 1 9 8 3 - 3. A r g e n t i n a — E c o n o m i c policy. 4. Argentina—Politics and g o v e r n m e n t — 1 9 5 5 - 1 9 8 3 . 5. A r g e n t i n a — Politics and g o v e r n m e n t — 1 9 8 3 I. Title HC175.E68 1993 338.982—dc20

British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available f r o m the British Library.

Printed and bound in the United Slates of America T h e paper used in this publication meets the requirements of the American National Standard for P e r m a n e n c e of Paper for Printed Library Materials Z39.48-1984.

92-40793 CIP

AM and KW: Thanks

Contents

List of Illustrations Foreword José Alfredo Acknowledgments

Martinez

de Hoz

ix xi xvii

Introduction

1

1 The Crisis of Argentine Political Economy and the Breakdown of Corporatism, 1966-1989

5

The Tragic Cycle A Review of Argentine History Corporatist Theory The Corporatist Entities Potential Alliances Between Corporatist Entities The Power Brokers 2 Ongania and the Industrial Alliance, 1966-1973

8 12 20 24 31 33 39

The Ongania Presidency The Tentative Alliance Intensification of the Program and Growing Resistance Ongania's Social Program The Collapse of the Industrial Alliance The Levingston Presidency and the Shift in Coalitions The Lanusse Presidency and the Return to Praetorianism

39 43 52 58 60 63 67

3 Juan Peron and the Populist Alliance, 1973-1976

73

The Cdmpora Presidency and the Return to Peronism Peron and the Populist Alliance

73 76

vii

viii

Contents Cracks in the Alliance Perón 's Social Program The Shift in Alliances Praetorianism Revisited

4 Videla

and the Liberal

84 87 90 94 Alliance,

1976-1983

99

The Videla Presidency Martínez de Hoz and the Economic Plan La Tab lita and the Growing Resistance The Dirty War Viola and Economic Breakdown The End of the Proceso 5 Alfonsín

99 101 110 120 124 126

and the End of the Breakdown,

1983-1989

The Return to Democracy The Austral Plan El Tercer Movimiento Histórico The Unraveling of the Austral Plan The Path Toward Hyperinflation 6 An Overview

of the Breakdown

131 137 141 146 152 of Corporatism

The Breakdown of Corporatism Institutionalizing Democracy The Power Brokers The State The Corporatist Entities 7 The Menem

Presidency

A: Presidents

and the Break

and Ministers

1966-1992 Appendix B: Interviews Bibliography Index About the Book and Author

157 157 160 162 175 181

with

the Past

From One Democratic Government to Another The Bunge y Born Basis for Restructuring Stabilizing the Economy Cavallo and the Convertibility Plan Looking Toward the Future

Appendix

131

of

195 195 197 206 215 223

Economics, 229 233 237 247 254

Illustrations

Tables 2.1 5.1

The 1967 and 1968 Budgets as Prepared by Krieger Vasena The 1973 (Campora) and 1983 (Alfonsin) Election Results

50 133

Figures 1.1 1.2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Structure of Corporatist Entities Characteristics of Corporatist Entities Total Investment, 1964-1969 Annual Growth Rate of GDP, 1966-1970 Industrial Wages, 1966-1969 Unemployment Rate in Argentina, Cordoba, and Buenos Aires, 1966-1969 Number of Terrorist Actions, 1966-1972 Change in Investment in Equipment and Machinery During 1969, by Quarter Foreign Investment in Argentina, 1966-1971 Foreign Debt, 1966-1973 Annual Inflation Rate, July 1969-April 1973 Monthly Inflation Rate, 1973 Foreign Reserves, 1972-1975 Terms of Trade, March 1973-March 1976 Salary Differentials, May 1973-March 1975 Increase in Inflation Rate over Previous Year, May 1973-May 1976 Unemployment Rate, April 1973-October 1976 Foreign Debt, 1972-1976 Annual Growth Rate of GDP, 1972-1976 ix

21 32 48 51 53 57 60 62 62 65 66 79 80 81 83 86 94 95 97

x

Illustrations

4.1

M i l i t a r y S p e n d i n g as a P e r c e n t a g e of

4.2

Real Industrial W a g e s , 1 9 7 5 - 1 9 8 0

104

4.3

Agricultural Production, 1 9 7 2 - 1 9 7 9

105

4.4

M o n t h l y I n f l a t i o n R a t e , M a r c h 1 9 7 6 - J a n u a r y 1977

106

4.5

Government Budget Deficit, 1975-1982

107

4.6

U n e m p l o y m e n t Rate, April 1 9 7 6 - A p r i l 1982

109

4.7

Spending on Imported and Domestic Capital Goods,

4.8

Real E x c h a n g e Rate, January 1 9 7 8 - S e p t e m b e r 1980

113

4.9

N u m b e r of S t r i k e s a n d R e a s o n s f o r T h e m , 1 9 7 6 - 1 9 8 0

114

4.10

Government Domestic Borrowing, 1975-1980

116

4.11

Private Domestic Debt, 1975-1980

117

4.12

B u d g e t D e f i c i t as P e r c e n t a g e of G N P , 1 9 7 5 - 1 9 8 1

118

4.13

Foreign Debt, 1 9 7 5 - 1 9 8 4

120

4.14

A n n u a l G r o w t h R a t e of G D P , 1 9 7 5 - 1 9 8 2

127

4.15

A n n u a l Inflation Rate, July 1 9 7 6 - D e c e m b e r 1983

128

5.1

Annual G D P Growth, 1984-1989

138

5.2

B u d g e t D e f i c i t as P e r c e n t a g e of G D P , 1 9 8 2 - 1 9 8 7

147

5.3

Foreign Debt, 1983-1988

148

5.4

Real Wages, 1 9 8 4 - 1 9 8 9

149

5.5

U n e m p l o y m e n t R a t e in B u e n o s A i r e s ,

5.6

Annual Inflation Rate, 1983-1989

154

6.1

Per Capita G D P , 1 9 6 5 - 1 9 8 6

158

6.2

A r g e n t i n a ' s P e r C a p i t a G N P C o m p a r e d to O t h e r C o u n t r i e s ,

7.1

E c o n o m i c Restructuring, Years 1 to 7

202

7.2

G o v e r n m e n t Budget Surpluses, 1990

209

7.3

Monthly Inflation Rate, 1990

210

7.4

Real E x c h a n g e Rate, 1990

211

7.5

C o n s u m e r and Wholesale Monthly Inflation Rates

7.6

G D P and Industrial Output G r o w t h Rates, 1 9 9 0 - 1 9 9 3

Government Expenditure, 1975-1979

1975-1980

N o v e m b e r 1985-April 1989

1960-1983

U n d e r Cavallo, April 1991-July 1992

103

112

151

177

219 224

Foreword José Alfredo Martínez

de Hoz

D a v i d e E r r o c o m m e n c e s Resolving the Argentine Paradox by p o s i n g a question that has been asked innumerable times by k n o w l e d g e a b l e foreigners and visitors to Argentina, as well as by preoccupied Argentines themselves: " H o w has a c o u n t r y of such great potential, w h i c h had such a u s p i c i o u s beginnings, found itself in such utter ruin?" E r r o set himself the task of finding an a n s w e r to the paradox, with ali t h e d i f f i c u l t i e s f a c e d by s o m e o n e w h o has not lived p e r m a n e n t l y in the country during any significant part of the period studied. T o o v e r c o m e this obstacle, in addition to digging up and reading important and select literature written by both A r g e n t i n e s and foreign s c h o l a r s — s o m e of which was quite d i f f i c u l t to f i n d — h e traveled to A r g e n t i n a several times o v e r the course of t h r e e years. D u r i n g these visits, he was able to interview (in s o m e c a s e s m o r e than o n c e ) m o r e than f i f t y p e r s o n a l i t i e s f r o m all q u a r t e r s of t h e ideological s p e c t r u m , w h o had either been directly involved in A r g e n t i n e public a f f a i r s (both inside and outside the g o v e r n m e n t ) or were p r e e m i n e n t a c a d e m i c s k n o w n f o r their studies of the evolution of A r g e n t i n e political, e c o n o m i c , and social (mainly labor) events during the period. T h e author was thus able to get a fairly clear and unprejudiced picture of his subject and avoided the possibility of being considered a " w e e k e n d - t r i p expert." Although in s o m e cases he might be faulted f o r s o m e lack of insight into certain details, the d i s a g r e e m e n t o n e could have d o e s not a f f e c t his overall c o n c l u s i o n s . In addition, he probably has an a d v a n t a g e o v e r s o m e local analysts in that in seeing the trees he has not obscured his view of the forest. I m y s e l f , as s o m e o n e w h o has personally lived through the period in q u e s t i o n with great intensity and activity in both t h e public and p r i v a t e sectors, on the o c c a s i o n of each of E r r o ' s visits to A r g e n t i n a w a s able to a p p r e c i a t e h o w his u n d e r s t a n d i n g of the r e l e v a n t c o m p l e x political and e c o n o m i c processes and personalities matured as his research progressed. O n e of the m o r e important merits of D a v i d e E r r o ' s book is that, unlike so m a n y xi

xii

Foreword

e c o n o m i c analysts who examine the results o f economic programs from a purely e c o n o m i c (and many times theoretical) point o f view, he adroitly places them in the political and social context o f their times. T h e relative importance o f politics vis-à-vis e c o n o m i c s has been the s u b j e c t o f infinite discussions all over the world. Nevertheless,

the

interrelation between the two is so great that it can safely be concluded that an economic policy, however good it may be, cannot be successful without a firm and continuous political system to support it. It is also true that political stability can be jeopardized by the lack o f an adequate economic policy and its sometimes necessary " c o u r a g e o u s " implementation. In this sense, a government's political "sensitivity," or the sacrifice o f long-term sound economic objectives in return for short-term "political" profits, can only postpone the moment of facing harsh economic reality. In other words, when governments or political parties have used the excuse of "excessive political costs" for not facing and finding a solution to basic structural economic problems, the results have proved to be politically more costly than if the decision had been taken to implement the requisite measures at the right moment despite the apparently negative short-term factors.

Davide

Erro was quick to realize the importance that

this

interrelationship between politics and economic policy had in the Argentine scenario. Inflation in Argentina, which began in 1947 after nearly half a century of monetary stability, has been one o f the most negative factors in the evolution o f the country's economy. S o m e governments and political parties actually looked upon inflation during certain periods as instrumental to the promotion o f growth. Others used it as an instrument for redistributing income. Economic agents and the population as a whole first learned how to live with inflation (that is, how to protect themselves from its effects) and then how to profit from it. In the end, it became a veritable addiction, and most economic actors were loathe to see it disappear and be forced to live without this crutch. Undoubtedly, in many cases profits earned through inflationary windfalls were easier to obtain than those originating in hard work, investment, and productive efficiency. For the economy, this meant that there was more incentive for the redistribution than the creation o f income and wealth, which explains the very moderate overall rate o f growth between 1966 and 1989. Within this context, one sector inevitably had to grow at the cost o f another. T h e result was a continuous tug-of-war that characterized the whole period. T h e other main f a c t o r s — a p a r t

from

inflation—that caused the stagnation of the Argentine economy were the state intervention policy and the closed economy model, which have their principle origins in the immediate post-World War II period. In Davide Erro's examination of the successive governments beginning in 1966, he is quick to point out the preeminence each one gave to these factors. Political demagogy (loosely called " p o p u l i s m " ) sacrificed long-term

Foreword

xiii

structural economic objectives for short-term political benefits. In other cases, the anti-inflation policy was grounded only in monetarist policy that did not really attack the structural problems. When these problems were seriously confronted with a policy that could be considered the basic cure for economic stagnation, including inflation, the short-term results many times caused price increases due to price liberalization and deregulation of the economy. A successful balance among all of the factors was difficult to achieve. The theme underlying Davide Erro's work is the action of the so-called corporatist entities, or organized interest groups, and the lobbying exerted by them on successive governments, in conjunction with changing alliances of these pressure groups with the "power brokers," which put the governments in office. This interaction explains many of the initial successes and later failures of various economic programs, either through lack of continuity caused by loss of support or by the inability to resist opposition to basic economic reform measures from groups jockeying for their own vested interests. Davide Erro concludes that "the failure of corporatism rests in the inability of the power brokers to intermediate between the corporatist entities while simultaneously implementing a rational program geared towards economic restructuring." This conclusion explains the political cycles and the associated changes in regimes and general instability, as well as certain defects inherent in the Argentine political institutional framework. In the author's words, "despite the very different structures and ideologies embodied in each of the governments studied, none of them proved able to implement fully a rational economic plan. . . . Each of the governments, regardless of its policies or structures, seemed unable to break the tragic cycle. The answer offered is that each of these governments confronted an immutable (in the short-term) corporatist structure that blocked rational policymaking." In June 1989, the mismanagement of economic policy culminated in a monthly inflation rate that, measured by the consumer price index, rose to 2 0 0 percent. The hyperinflationary period that the country lived through can be said to have had a positive effect; it scared the population at large and demonstrated the ravaging damage inflation can cause. It has been a successful vaccine since then, and now there is widespread preoccupation to avoid policies or measures that could rekindle the inflationary spiral. In the history of nations as in the lives of men, it is sometimes necessary and salutary to hit rock bottom in order to rebound and continue in the right direction on the right path. President Alfonsin, unable to cope with the chaotic crisis, voluntarily resigned six months before the expiration of his term in office, allowing President-Elect Menem to take over the reigns of government in mid-July 1989. The change that swept over the country is attributed mainly to the breakdown of corporatism and the lack of other alternatives. In other words, "the corporatist structure continues to crumble on all fronts. The corporatist entities grow increasingly irrelevant and divided. The power brokers grow

xiv

Foreword

m o r e c o h e s i v e and rational. D e m o c r a c y is further taking root as all political c o m p e t i t i o n s n o w occur within this arena. Redistributions and subsidies, the d r i v i n g f o r c e s b e h i n d past a l l i a n c e s , are b e i n g e l i m i n a t e d . As a r e s u l t , investment is on the rise, capital is being repatriated, and foreign investors are beginning to return." T h e r e is a lot of truth in D a v i d e E r r o ' s words, but a very i m p o r t a n t f a c t o r that is probably implicit in t h e m should be made explicit in order to explain clearly the break with the past. Since the end of W o r l d W a r II, years of practice and indoctrination of the b e n e f i t s of state intervention in t h e e c o n o m y , practically absolute state o w n e r s h i p of public utilities and public services in general in addition to many productive industries, and the closed e c o n o m y model resulted in the relative stagnation and lack of modernization and c o m p e t i t i o n in the A r g e n t i n e e c o n o m y . It gradually b e c a m e a p p a r e n t , therefore, that this w a s not the right path to growth and progress. Certainly many industries and sectors benefited f r o m state welfare h a n d o u t s such as high protectionism, subsidies, and so on, but the overall e c o n o m y did not. T h e t w o m a j o r political parties had e m b r a c e d these mistaken policies. Only s o m e minority leaders and enlightened individuals had the c o u r a g e to speak out against the c o n v e n t i o n a l w i s d o m , which was d e e m e d to be m o r e "patriotic." During s o m e periods, g o v e r n m e n t policies were reversed mainly to t a c k l e i n f l a t i o n , as in 1 9 6 7 - 1 9 6 9 , with s u c c e s s f u l results that lack of policy c o n t i n u i t y u l t i m a t e l y t h w a r t e d . D u r i n g the f i v e - y e a r period f r o m M a r c h 1976 until M a r c h 1981, an e c o n o m i c p r o g r a m w a s a n n o u n c e d and i m p l e m e n t e d to attack not o n l y i n f l a t i o n but also the b a s i c s t r u c t u r a l d e f o r m a t i o n s and b o t t l e n e c k s of the e c o n o m y caused by state o w n e r s h i p , e x c e s s i v e r e g u l a t i o n , and the closed e c o n o m y model. At the end of that period, the fruits of the initial and most difficult structural r e f o r m s e f f e c t e d and m e a s u r e s taken were prevented f r o m maturing fully, a fact that b e c a m e e v i d e n t with a n o t h e r case of lack of c o n t i n u i t y and the reversal of t h o s e policies. Nevertheless, the decline of the e c o n o m y over the next ten years and the b r e a k d o w n of the state enterprises and utilities that were unable to provide the required basic services, together with the practical bankruptcy of the state and finally h y p e r i n f l a t i o n , b r o u g h t to light the stark reality of the failure of the w e l f a r e state, of the c l o s e d e c o n o m y m o d e l , and of inflation to p r o m o t e g r o w t h and general i m p r o v e m e n t of the standard of living. T h u s the s e e d s that had so laboriously been s o w n during earlier efforts w e r e not lost, and b l o s s o m e d in the f o r m of a gradual change in the mentality of the population as a w h o l e . Sick and tired of e m p t y ideological debate and the f a v o r i t i s m s h o w n to certain sectorial interests over the general weal, the people began to d e m a n d a c h a n g e in policy in the right direction and, f o r the first time in m o d e r n A r g e n t i n e history, used their voting p o w e r at the polls to chastise those l e a d e r s w h o had not realized the need to adapt their political and e c o n o m i c policies to the requirements of modern progress.

Foreword

xv

W h e n Dr. Carlos Saul M e n e m b e c a m e president in July 1989, he w a s quick to r e c o g n i z e the c h a n g e of m o o d of the p o p u l a t i o n . H e adopted the policies of state r e f o r m , privatization of public enterprises, deregulation, and the opening up of the e c o n o m y and promotion of competition, together with a strong anti-inflationary program. These policies, backed by the p r e s i d e n t ' s political d e c i s i v e n e s s and the p u b l i c ' s strong political support, in e s s e n c e represent the break with the past and the b r e a k d o w n of corporatism that the c h a n g e in mentality of the population has brought about. Davide Erro's book f u n d a m e n t a l alteration of i m p l e m e n t e d with f o r c e f u l to the "Argentine P a r a d o x "

w a s w r i t t e n d u r i n g the initial stage of this the A r g e n t i n e picture. If the right policies are decision and u n w a v e r i n g continuity, the solution will have been found.

Acknowledgments

Many people were instrumental in helping hone the ideas in this book. Nancy Bermeo, my adviser at Princeton University, not only pointed me in the right direction at the beginning of my research, but also offered numerous and often pointed criticisms as my work progressed; as disheartening as they might have been at first, they were always well calculated to make my work more coherent. Atul Kohli, a professor at Princeton's Wilson School, offered tremendous insights into economic development. Professor Paul Sigmund, also at Princeton, offered support and encouragement without which I never would have found the energy to transform an academic work into a book. I am also indebted to many in Argentina. Professors Juan Carlos Torre, Alfredo Juan Canavese, and Marcelo Cavarozzi were generous with their time and their own theories regarding the Argentine Paradox; to a greater or lesser extent, all of their theories have either influenced this book or been incorporated in it. Almost everyone I interviewed was very helpful, but special thanks to Orlando J. Ferreres, Alberto L. Grimoldi, Juan Carlos Herrera, and Jorge Vives. The Woodrow Wilson School, as well as Princeton University generally, was an ideal place to produce this work. I am deeply indebted and thankful for the stimulating atmosphere, the resources (including several grants that allowed me to go to Argentina to conduct the bulk of my research), and all the people that make the institution what it is. Finally, I must recognize the Horace Mann School and two particular mentors, Murray Mogel and Carlo Puca. Davide G. Erro

xv 11

Introduction

E a c h individual p a g e of A r g e n t i n e politics has been filled with passions, ideals, and great desires. It seems as though this emotionality is a central and possibly d e f i n i n g characteristic of not only the c o u n t r y ' s politics, but also its psyche. T h e R a d i c a l s ' first ascent to power, Juan P e r ó n ' s populist m o v e ment, and the recent Malvinas/Falkland W a r , as examples, are separated by over half a century, very different political viewpoints and circumstances, and vastly d i f f e r i n g social structures. All the same, each of these occurrences, as well as many others, had a very similar " f l a v o r . " T h e majority of Argentines felt during each of these times that a new and fundamental change was occurring, s o m e t h i n g akin to a new awakening. Each endeavor in Argentine politics promised to place this Latin A m e r i c a n nation in a new and m o r e privileged place in world history. A new j u s t i c e and national p r o m i n e n c e were p r o m i s e d , g e n e r a t i n g w i d e s p r e a d and sincere acclaim f r o m the A r g e n t i n e citizens. If the individual g o v e r n m e n t s and political m o v e m e n t s w e r e generally greeted with great e n e r g y , this excitement t r a n s f o r m e d itself into s o r r o w , c o n f u s i o n , and p o s s i b l y a n g e r as each p a g e of A r g e n t i n a ' s history w a s written. It m i g h t be said that as A r g e n t i n e politics b e c o m e s A r g e n t i n e history, f e r v o r and self-assurance transform into lethargy and self-criticism. A s one looks b a c k , o n e sees only m i s s e d opportunities. M o r e o v e r , each period of Argentine history inflicted great costs, economically, socially, and personally; and for w h a t ? In studying A r g e n t i n e history, one cannot but feel regret and c o n f u s i o n : all the energy spent, all the blood spilled in search of ideals, has brought little except more suffering. It is not easy to explain why this d i c h o t o m y exists between expectations and results, why the great passions caused only great failures. T h e question, indeed, is simply a restatement of another that has long plagued A r g e n t i n e s and a c a d e m i c s alike: H o w has a country of such great potential, which had such a u s p i c i o u s beginnings, found itself in such utter ruin? It is difficult to a n s w e r what may be termed the Argentine Paradox, but it seems clear that the ideals and great passions unleashed during the various periods of A r g e n t i n e

1

2

Resolving

the Argentine

Paradox

history have led to the disastrous conclusions. In other words, the o p t i m i s m d u r i n g so many of the political processes actually led to their failure and the resultant generalized p e s s i m i s m about the country. A f t e r so many broken d r e a m s , however, perhaps Argentina has finally s t o p p e d looking f o r a savior, a quick fix to all p r o b l e m s . This c h a n g e , far m o r e important than any of the "revolutions" claimed in the past, may foster a f u n d a m e n t a l c h a n g e of course, a new political stability, and, finally, a return to e c o n o m i c growth.

At the b e g i n n i n g of this century, A r g e n t i n a w a s o n e of the so-called countries of new settlement, together with Australia, C a n a d a , N e w Z e a l a n d , and, to a lesser extent, the United States. T h e s e countries all had vast tracts of fertile land and a relatively small population m a d e up largely of recent E u r o p e a n i m m i g r a n t s . It w a s thought that these c o n d i t i o n s were ideal f o r stable republican g o v e r n m e n t s and prolonged rapid e c o n o m i c growth. Indeed, these were the very prospects that attracted the steady f l o w of immigrants. A century later, the prediction of political stability and e c o n o m i c growth has been b o r n e out in e a c h of the countries except A r g e n t i n a , f o r w h i c h p e o p l e had the highest of h o p e s . In the 1890s, A r g e n t i n a was the sixth richest country in the world in per capita terms. T h e r e is agreement that all p r o g r e s s e d well t h r o u g h the 1920s. T h e e c o n o m y g r e w briskly and the political situation, although not consolidated due to f r a u d and exclusion of large sections of the population, was stable. Indeed, on all levels A r g e n t i n a fared quite favorably with the other countries of recent settlement. T h e G r e a t D e p r e s s i o n and the s u b s e q u e n t b r e a k d o w n in international trade quite naturally caused e c o n o m i c hardship in this nation that was highly d e p e n d e n t on exporting agricultural products and importing industrial goods. H o w e v e r , it would be u n f a i r to say that A r g e n t i n a lost its way d u r i n g this d e c a d e of world economic crisis. Indeed, the Great Depression had far less of a detrimental e f f e c t on A r g e n t i n a than on most other countries, including the United States, most of Europe, and Latin American neighbors such as Brazil. W o r l d W a r II, the next m a j o r world crisis, in no way harmed the c o u n t r y ' s p r o s p e c t s . A r g e n t i n a r e m a i n e d neutral until the very e n d of t h e international conflict, a l l o w i n g the country to sell its s o u g h t - a f t e r agricultural p r o d u c t s to any of the warring E u r o p e a n p o w e r s f o r i m m e n s e profits. T h e decision to join the Allies w h e n their victory b e c a m e imminent assured A r g e n t i n a a place at the peace negotiations as well. H o w e v e r , the period j u s t before and during W o r l d W a r II coincided with the d e v e l o p m e n t of P e r o n i s m in Argentina. W h e r e a s the 1940s w e r e quite p r o f i t a b l e f o r Argentina, as they were for the other recently settled countries, the Latin A m e r i c a n nation began to diverge f r o m these other countries politic a l l y . I n d e e d , the g r o w t h of P e r o n i s m and the c h a n g e s this m o v e m e n t w r o u g h t on Argentine society have often been b l a m e d f o r the subsequent and

Introduction

3

precipitous decline of Argentina in the following decades. Clearly, General Juan P e r ó n had a t r e m e n d o u s e f f e c t on A r g e n t i n e d e v e l o p m e n t , both e c o n o m i c a l l y and p o l i t i c a l l y . Just as i m p o r t a n t , this m o v e m e n t f u n d a m e n t a l l y differentiated Argentina f r o m the other countries of recent settlement. T h e r e is no doubt that much of the political instability and economic sclerosis in the years following P e r ó n ' s overthrow in 1955 directly related to the policies implemented and forces mobilized by the general. O n e cannot blame all of A r g e n t i n a ' s subsequent problems on P e r ó n ' s movement. Although very different f r o m the political figures in Australia and C a n a d a , Perón can certainly be compared to Getulio Vargas in Brazil or Francisco Franco in Spain as well as to several other populist leaders. These other histories would suggest that the overthrow, or, in the extreme, the death of such a leader would allow for the re-creation of stability and rational economics. Neither the overthrow of Perón in 1955 nor his death in 1974 led to such changes. The problems afflicting Argentina went beyond the political divisions wrought by the caudillo. Indeed, the period f r o m 1966 until 1989, examined herein, marks an actual deterioration on both the political and economic scenes as compared to any preceding periods of Argentine history, including P e r ó n ' s first tenure in government and the years immediately after his downfall. During these years, political crises became c o m m o n p l a c e . Despite intermittent short periods of economic growth, this time was marked by the most rapid economic decline the country ever experienced. It is fair to say that these two- and-a-half decades represent the culmination of all of Argentina's then existing problems. As will be seen in the body of this work, it is not for a lack of ideas, sacrifice, or d e t e r m i n a t i o n that this black period in A r g e n t i n e history followed. Quite the contrary, many different political structures and economic ideologies were attempted to resolve the n a t i o n ' s problem. Sacrifice was demanded of all groups: at various times the workers were given lower wages in order to pay for a new future, the agricultural elite was forced to reduce profit margins to pay for industrial development, many national industries went bankrupt in the n a m e of greater efficiency and a better distribution of resources. Numbers of young people were encouraged if not forced into exile for political or economic reasons as a necessary or inevitable consequence of the policies effected. Worst of all, tens of thousands of lives were lost, f r o m unionists to businesspeople, f r o m leftists to rightists, f r o m underclothed draftees sent to the Malvinas/Falkland W a r to many an innocent individual caught in the crossfire. This work attempts to offer an explanation as to why political and economic initiatives failed. The failures, however, have cooled the passions and the search for ideals that thus far rendered discussion and agreement among the various groups of Argentines impossible. With a bit of luck, this change in outlook regarding current politics will allow one to look back on Argentine history in several years not with sorrow and confusion but rather with pride and understanding.

1 The Crisis of Argentine Political Economy and the Breakdown of Corporatism, 1966-1989

In 1966, Juan Carlos Ongania ascended to the Argentine presidency. In 1973, Juan D o m i n g o Peron followed him. Similarly, J o r g e Videla ascended in 1976 and Raul A l f o n s i n

in 1 9 8 3 . E a c h o f these presidents c a m e to power

advocating fundamental changes in the structure and workings o f Argentine politics, e c o n o m i c s , and even society. T h e s e changes were supposed to be geared toward creating political stability and fostering sustained e c o n o m i c growth, both o f which had been long lacking in the country. Each man c a m e to power with an extended mandate (at least five years) during which time these c h a n g e s were to be effected. Finally, each o f these four men utterly failed: All o f the governments ended abruptly during periods o f political chaos and economic crisis. E a c h o f these governments has been well studied. T h e Ongania presidency, for example, is the basis o f the bureaucratic authoritarian model proposed by G u i l l e r m o O ' D o n n e l l , the focus o f W i l l i a m C. S m i t h ' s work on Argentine political e c o n o m y , and the subject o f a slew o f articles. Literature on the other governments is just as abundant. It might be claimed that the reasons for the failure o f each o f these governments are "understood," at least as well as can be expected in political science; one and often several explanations exist for the failure o f each o f these governments. T h e explanations are c o u c h e d in theoretical arguments but none o f the individual explanations seems to apply to all o f the governments between 1 9 6 6 and 1989. T h e implication appears to be that the causes o f each o f the failures were particular to each o f the individual governments. However, many questions remain. In order to better resolve these questions, the whole period should be studied as a distinct unit. T h e particular problems confronted and aims proposed by these governments, although seemingly different, are fundamentally the same. W h e r e a s the governments between 1 9 5 5 and 1 9 6 6 (with the notable exception o f Arturo Frondizi's discussed b e l o w ) did not call for, much less attempt to effect, a fundamental restructuring o f Argentina, each o f these four presidents did. On the political side, each o f these presidents wanted to

5

6

Resolving

the Argentine

Paradox

impose a certain political outlook on the nation as a part of the restructuring. Their governments often attempted to force interpretations of history, moral values, and political ideology on the population at large. Even more clear was the fact that each of these men wanted a complete restructuring of the Argentine economy. It was clear to many at the time, and to all in retrospect, that Argentina had come to an economic impasse; the country's economy did not lead to or encourage investment. Each of the presidents realized this problem, and a central aspect of all of these governments became the resolution of the economic stagnation. Various attempts were made to find a new mode of capital accumulation. The solutions each of the presidents offered, it must be emphasized, had tremendous implications for the structure of the economy and the income of all economic groups. Had any solutions been successful, certain economic groups would certainly have prevailed over others in a process of economic realignment. Moreover, the issues confronted during the 1966-1989 period were far broader and more penetrating than in the preceding years. These governments saw Argentina's problems as being more complex and deep-rooted than was commonly assumed during other periods. It was thought, as stated above, that part of the remedy rested in new, bold, and comprehensive economic policies. At the same time, these governments advocated altering the very social and cultural underpinnings of the nation. Such policies, which took any form from propaganda to violent repression, were in part geared towards reintegrating the Peronist voice, excluded for over a decade following Juan Perón's exile. This goal was a perennial one in Argentina and resembled that of all preceding governments. The policies themselves, however, contrast markedly with the previous flimsy political attempts to reintegrate the Peronists through various political alliances and limited conscriptions of political candidates. The policies implemented by these four governments were geared toward getting to what were considered the roots of the problems, instead of merely counteracting the results. These were to be "serious" governments with clear goals, wide powers, and tremendous consequences. Indeed, the slogans of the governments studied—la Revolución Argentina, la Reconstrucción Nacional, el Proceso de Reorganización Nacional, and el Tercer Movimiento Histórico—reflect the peculiar character shared by all of them. The reasons for studying these four governments as a unit become all the more clear when one realizes that there are three important similarities shared by all of them. Just as important, these similarities also begin to suggest that the reasons for each of these governments' failures are not particular to themselves. First, all of these regimes came to power with widespread popularity and support that cut across interest groups and social and economic classes, as will be shown in the following chapters. It must be emphasized that this contrasts with the preceding governments. From the beginning of the century until Perón's overthrow in 1955, governments tended to have limited support from only certain economic groups or classes,

The Crisis of Argentine

Political

Economy

7

a support that tended to split Argentine society into two factions, generally of approximately the same power. Hipólito Yrigoyen, the founder of the Radical Party who then became president, crystallized through his political actions the tensions between the old "oligarchy" and the new middle classes. Perón was famous for dividing Argentine society into pro- and anti-Peronists, both of which had similar levels of power. From 1955 until the period studied, on the other hand, governments had only minimal support, but support which, compared to the previous period, cut across social classes. President Arturo Illia (1963-1966), for example, was elected with a plurality of only approximately 25 percent of the votes—hardly a strong mandate. The governments to be studied here were not saddled with these weaknesses. Second, at the beginning of each of these governments, there was widespread agreement among politicians, economists, and society at large that significant changes had to occur in the political and economic spheres. In other words, society offered government the go-ahead to implement policies that might overhaul Argentina politically and economically. Indeed, this acceptance of the need for such policies led almost all groups, as will be seen in the following chapters, to accept short-term sacrifices in the hopes of long-term gains. Third, each of these governments came to power with an extended mandate, generally of five years. Such a period of time should be sufficient to implement fully any set of policies. Clearly, these three conditions, particularly taken together, were highly advantageous for an incoming government with the hopes of implementing la Revolución Argentina or el Tercer Movimiento Histórico. The two main differences between these governments are just as important, however. First, the structures of regimes were widely divergent. General Ongania came to power through a military coup, although he himself had already retired from active service; his government corresponds to a variation of a bureaucratic authoritarian regime. Perón, a highly charismatic leader of fundamental importance in Argentine history, came to power through the mobilization of his core followers, which resulted in elections he went on to win; his government might be termed a mass-movement democracy. The Videla government was yet another attempt at bureaucratic authoritarianism, this time under the direct control of active military officers. Finally, Alfonsin, also very charismatic, was democratically elected in a very competitive election. Second, the policies implemented by these governments were just as diversified as the types of regimes themselves, ranging from populistlike economic policies under Perón to conservative ones under Videla. In other words, in analyzing Argentina's problems, each of these governments came up with different supposed problems and potential solutions. The initial popularity and agreement that greeted these governments

8

Resolving

the Argentine

Paradox

suggest that they each had an advantageous social and political climate in which to attempt their policies. The different policies were based on dissimilar assumptions and ideologies, at least one of which should have been "correct." Given these factors, one of these governments should have been successful at reforming Argentine politics and economics. The juxtaposition of these factors leads to a central question: Were the problems that caused the failure of these governments distinct for each one, as the existing literature seems to imply,' or continuous throughout the twentythree-year period? The question becomes even more intriguing when one notes that there is now growing agreement that all of the initial economic programs were rational as proposed and could have been successful in promoting sustained growth had they been fully implemented for an extended period of time. In other words, the economic failures cannot be attributed simply to a series of incoherent economic plans. 2 The answer to the above question, as the evidence thus far presented implies, is quite definitely the second alternative: There were continuous structural problems that blocked the implementation of any economic and political strategy during the whole period here studied. What were these structural impediments? More generally, why has Argentina been unable to implement a viable development strategy and to promote political stability? This study attempts to answer those questions.

T h e Tragic Cycle Each of the four governments ended in crisis. It was repeatedly assumed that these periods represented the total breakdown of the political and economic structure. "When the military took power in 1976, the whole economic and political system had broken down. We had to build it up from nothing—there was no alternative," 3 is a statement that exemplifies the feelings surrounding a regime change. This recurring conclusion was supported by the overtly radical changes in the type of regime and economic policies after each crisis. Upon closer examination, however, a cycle can be discerned that is common to all four governments: The first phase: A consensus grows among important interest groups and society at large that the political system must be overhauled in order to ensure political stability and economic prosperity. The important interest groups or "primary corporatist entities" congregate around a particular "power broker" capable of taking control of government. The second phase: The power broker ascends to the government through an unconventional and noninstitutionalized procedure. This is clearly the case for military coups. The same is claimed, however, for the first democratically elected government after a prolonged military regime, all the more so when

The Crisis of Argentine Political Economy

9

the elections and the transfer of power occur during political breakdown and economic instability. All the governments here studied were products of such chaotic and atypical circumstances. The first policies implemented by each of these governments are geared towards satisfying all the corporatist entities, particularly through expansionary e c o n o m i c policy. The third phase: T h e original economic policy, due to its disregard for inevitable e c o n o m i c trade-offs, gives rise to growing inflation and distributional conflicts. Far f r o m encouraging investment so needed for e c o n o m i c growth, these policies and the resulting situation actually discourage it. As a result, the e c o n o m i c policy changes course and assumes an independent and ostensibly rational (as compared to political) direction. The economics team, composed of n o n m e m b e r s of parties—or outsiders—is given autonomy but is required to accomplish immediate and continuous advances on various fronts: reduce inflation, promote growth of the gross national product (GNP), and, theoretically just as important but in actuality less urgent, implement structural reform. These economic criteria become the "objective" measures of the validity of the economic policy. It must be emphasized that no tradeoff, even in the short term, is acceptable. A tentative alliance is created with the goal of effecting higher growth and investment as well as lower inflation. This alliance includes a group of corporatist entities and the government, or, more specifically, the economics team. The alliance excludes the other corporatist entities. It can be termed "tentative" as there is not a complete partnership between the favored entities and the g o v e r n m e n t , especially because special emphasis is placed on not antagonizing the excluded sectors. T h e new stability and the rational e c o n o m i c plans foster an initial e c o n o m i c b o o m based on bringing unused but installed excess industrial capacity on-line. The fourth phase: As a result of the lack of structural changes and the delayed costs of the economic plans, pressures in the original economic plan mount, f o r c i n g more drastic measures. This tension is reflected in s o m e c o m b i n a t i o n of m o u n t i n g inflation and slowing growth. T h e s e m e a s u r e s force the further exclusion of the nonallied sectors and greater tensions within the original alliance. The fifth phase: Oppositional forces (including certain sectors of the original alliance) begin lobbying the more sympathetic factions within the p o w e r b r o k e r g r o u p . T h e s e s a m e interest g r o u p s also start o p p o s i n g g o v e r n m e n t policy within society at large by m e a n s of strikes, d e m o n strations, and so on. T h e growing opposition to the government and to the economic policies inevitably causes a deterioration of the primary economic indicators (inflation and G N P growth). The sixth phase: An internal c o u p occurs, causing a radical shift in economic policy. N e w strategies are attempted, but the lack of confidence in

10

Resolving

the Argentine

Paradox

a government that so recently changed directions blocks the consummation of new partnerships between corporatist entities and the state. Hence, economic policy rapidly degenerates into ad hoc initiatives geared toward staving off an immediate economic crisis. Among the corporatist entities and within society at large, open antagonisms grow as each group attempts to defend its own self-interests; conditions similar to those of praetorianism 4 appear. The seventh phase: In the midst of political chaos and economic crisis that the g o v e r n m e n t can no longer contain, a new consensus emerges that fundamental political, economic, and even social changes must be effected. The cycle is repeated. In sum, 1966 through 1989 has been marked by a cyclical formation and breakdown of consensus a m o n g corporatist entities and even in society at large. A model in the form of a comparison is in order both to summarize and to e l u c i d a t e . A r g e n t i n a can be seen as a p a t i e n t g o i n g t h r o u g h p s y c h o a n a l y s i s . T h e p a t i e n t ' s p r o b l e m s all relate to relatively f e w fundamental disorders. These disorders keep recurring in very different guises that often obscure rather than clarify the fundamental maladies. Further, in the process of getting "cured," the patient first deteriorates and then slowly e m e r g e s f r o m the depths of his crises. What occurred in Argentina was similar. T h e situation w h e n O n g a n i a was o v e r t h r o w n was mild in c o m p a r i s o n to the open political warfare and e c o n o m i c standstill that shrouded the overthrow of the Peron government. The crisis at the end of the Alfonsin presidency was also trivial in comparison: Political violence was nil and the economic crisis was purely financial (hyperinflation). Indeed, I claim that the Alfonsin g o v e r n m e n t demarcates the end of the structural impediments. But what were the fundamental problems that kept reemerging? What fundamental name can we give this neurosis? There are three central traits that one can discern from this repeated order of events. First, the power broker is unable or unwilling to c o n s u m m a t e a complete alliance or "marriage" of interests with a particular economic group: Although s o m e groups are favored over others, never is the government apparatus clearly aiding one group in the economic reorganization of the nation. S e c o n d , there is an o b v i o u s disparity in the relative powers of the power broker in question and the corporatist entities, the latter being far more powerful, a power that increases with time during each government. Due to this, the c o r p o r a t i s t entities are repeatedly able to f o r c e the replacement of the economic plan that the power broker has chosen. Third, all of the governments exhibit a clear time constraint, hence implementing policies geared toward simultaneously and immediately p r o m o t i n g both growth and disinflation, despite the inherent trade-off between these two economic indicators; in economic terms, there is a recurring time-consistency problem.

The Crisis of Argentine

Political

Economy

11

C a n a f u n d a m e n t a l h i n d r a n c e c o n f r o n t e d by ail f o u r g o v e r n m e n t s b e h o n e d f r o m t h e s e c h a r a c t e r i s t i c s ? Y e s — a t t h e m o s t b a s i c level, t h e p r o b l e m is a l a c k of l e g i t i m a c y , a r i s i n g m a i n l y f r o m t h e a b s e n c e of an i n s t i t u t i o n a l i z e d m e t h o d of c h o o s i n g a p o w e r b r o k e r . W h a t is essential to realize is that t h e r e is c o m p e t i t i o n b e t w e e n t h r e e b r o k e r s f o r p o w e r , e a c h of w h i c h , d u r i n g t h e p e r i o d s t u d i e d , relied o n d i f f e r e n t p r o c e s s e s of c o m i n g to p o w e r : the military coup, popular mobilization, and democratic elections. T h e fact that e a c h c o m e s to p o w e r in a very d i f f e r e n t m e t h o d j u x t a p o s e d with t h e f a c t that they are all viable h o l d e r s of p o w e r results in a lack of legitimacy f o r all that e n d u p in p o w e r ; n o m e t h o d of c h o o s i n g a p o w e r b r o k e r c a n b e c o n s i d e r e d f a i r or c o r r e c t . T h i s c o m b i n a t i o n of f a c t o r s a l l o w s the p o p u l a t i o n at l a r g e , t h r o u g h t h e v a r i o u s i n t e r e s t g r o u p s , f i r s t to e n c o u r a g e a p o w e r b r o k e r to g o v e r n m e n t , a n d then to u n d e r m i n e that g o v e r n m e n t by criticizing its very m e t h o d of c o m i n g to p o w e r and e n c o u r a g i n g a n o t h e r p o w e r b r o k e r to s u p p l a n t t h e first t h r o u g h s o m e o t h e r p r o c e s s of c o m i n g to p o w e r . A p r i m e c h a r a c t e r i s t i c of this c y c l e is t h e c o m p l e t e lack of e n d u r i n g r e s p o n s i b i l i t y or a c c o u n t a b i l i t y on the part of t h o s e that s u p p o r t e d c h a n g e s in g o v e r n m e n t s ; instead of b e i n g f o r c e d to u n d e r s t a n d w h e r e t h e g o v e r n m e n t s that the interest g r o u p s h a d c h o s e n w e n t w r o n g , interest g r o u p s w e r e r e p e a t e d l y a b l e to lay the b l a m e on the p o w e r b r o k e r . N e w f a n c i f u l h o p e s w e r e p i n n e d on c h a n g i n g governments. E l e c t i o n s c a n n o t b e c o n s i d e r e d a m o r e a c c e p t a b l e p r o c e s s of c h o o s i n g a g o v e r n m e n t as the initial s u p p o r t f o r and l e g i t i m a c y of t h e military r e g i m e s r i v a l e d t h a t of t h e n e w c i v i l i a n o n e s . M o r e o v e r , as shall b e s e e n , t h e o s t e n s i b l e p r o c e s s e s of c o m i n g to p o w e r — e l e c t i o n s , c o u p s , and so o n — a r e t h e result of a p r e v i o u s l y m a d e c h o i c e of p o w e r b r o k e r s , not vice versa; t h e c h o i c e of g o v e r n m e n t o c c u r s in d e c i d i n g w h e t h e r to s u p p o r t e l e c t i o n s , P e r ó n ' s r e t u r n , or a m i l i t a r y c o u p , not in an e l e c t i o n b o o t h . It is t h e interest g r o u p s that c h o o s e a m o n g t h e p o w e r b r o k e r s by d e c i d i n g t h e p r o c e s s of c o m i n g to p o w e r ; t h e p o w e r b r o k e r s t h e m s e l v e s n e v e r c o m p e t e on e q u a l terms

in

the

same

political

arena,

such

as t h e

ballot

box.

Within

this c o n t e x t , d e m o c r a c y o f f e r s little a s s u r a n c e of g u a r a n t e e d s u p p o r t or acceptance. In t u r n , this lack of l e g i t i m a c y p r o m o t e d d e s p e r a t e a t t e m p t s to gain and to retain s u p p o r t , a c o n d i t i o n n e c e s s a r y to a s c e n d to and to r e m a i n in p o w e r . T h e p o w e r b r o k e r w a s , as s h o u l d a l r e a d y b e clear, in a very w e a k situation c o m p a r e d to the c o r p o r a t i s t entities. A s a p o w e r b r o k e r n e v e r clearly w o n a m a n d a t e o v e r t h e o t h e r p o w e r b r o k e r s , t h e b r o k e r in g o v e r n m e n t

was

c o n s t a n t l y d e p e n d e n t o n t h e c o r p o r a t i s t e n t i t i e s t o r e m a i n in p o w e r . T h e p o w e r b r o k e r is c o n f r o n t e d w i t h a n e v e r - e n d i n g n e e d to p a n d e r t o t h e corporatist entities for their support or else to justify the economic program in s o m e o t h e r w a y . T h e relative w e a k n e s s b l o c k e d a direct c o n f r o n t a t i o n with the c o r p o r a t i s t entities, t h w a r t e d a total a l l i a n c e b e t w e e n the p o w e r b r o k e r and a m o r e p o w e r f u l entity (lest t h e p o w e r b r o k e r lose its o w n a u t o n o m y ) , and

12

Resolving

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Paradox

v a l u e d f a v o r a b l e e c o n o m i c i n d i c a t o r s a b o v e t h e r e s t r u c t u r i n g and l o n g - t e r m p r o s p e c t s of the u n d e r l y i n g e c o n o m y . W h y w a s t h e r e a p r o b l e m of l e g i t i m a c y in A r g e n t i n a ? R e s t a t e d , w h a t f a c t o r s h a v e led u p to t h e political i m p a s s e s t u d i e d h e r e ? T o a n s w e r this, a brief r e v i e w of A r g e n t i n e history is essential.

A Review of Argentine History F o r t h e p u r p o s e s of this s t u d y , A r g e n t i n e history c a n be d i v i d e d into f i v e p e r i o d s : t h e l i b e r a l p e r i o d e n d i n g in t h e e a r l y p a r t of t h e c e n t u r y , t h e i n c o r p o r a t i o n p e r i o d f r o m t h e e a r l y p a r t of t h e c e n t u r y until 1 9 5 5 , t h e p o l i t i c a l i m p a s s e p e r i o d f r o m 1955 until 1966, t h e c o r p o r a t i s t b r e a k d o w n p e r i o d ( w h i c h is the f o c u s of this b o o k ) f r o m 1966 until 1989, a n d f i n a l l y the r e n o v a t i o n period c u r r e n t l y g o i n g on. T h e liberal period w a s m a r k e d by rapid g r o w t h and close integration with the world e c o n o m y (and particularly that of Britain). T h e A r g e n t i n e e c o n o m y d u r i n g this p e r i o d w a s d r i v e n by a g r i c u l t u r a l e x p o r t s , a sector that b e n e f i t e d e n o r m o u s l y f r o m t h e c o m p a r a t i v e a d v a n t a g e s o f f e r e d by s o m e of t h e m o s t fertile l a n d s in t h e w o r l d . T w o p r o b l e m s d e v e l o p e d d u r i n g this p e r i o d . First w a s a p r o b l e m c r e a t e d by t h e p o l i t i c a l e x c l u s i o n of t h e vast m a j o r i t y of A r g e n t i n e s o c i e t y . T h e e c o n o m i c g r o w t h a t t r a c t e d an i m p o r t a n t f l o w of i m m i g r a n t s , a g r o u p that a c c o u n t e d f o r m o r e t h a n half of t h e A r g e n t i n e p o p u l a t i o n at t i m e s . It w a s a c o m m o n t e n d e n c y a m o n g this g r o u p to take u p r e s i d e n c y , but not to s e e k c i t i z e n s h i p , t h u s r e i n f o r c i n g their e x c l u s i o n f r o m civil society. O b v i o u s l y , the A r g e n t i n e elite w a s e a g e r to retain its p o w e r and encouraged this situation. The second problem was a recurring foreign accounts deficit, which caused inflation and currency instability.

This

p r o b l e m can be traced to t h e j u x t a p o s i t i o n of a high d e p e n d e n c e on i m p o r t e d f i n i s h e d g o o d s and of v a r i a b l e e x p o r t e a r n i n g s d u e to the v a g a r i e s of w o r l d m a r k e t p r i c e s a n d of c r o p yields. D i f f i c u l t i e s in i m p o r t i n g industrial p r o d u c t s w e r e r e i n f o r c e d d u r i n g W o r l d W a r I w h e n B r i t a i n , t h e s o u r c e of m o s t of Argentina's imports, was unable to satisfy Argentine demand for finished goods. T h e i n c o r p o r a t i o n p e r i o d w a s m a r k e d both by a t t e m p t s to c o r r e c t t h e s e p r o b l e m s a n d by political m a n e u v e r s to take a d v a n t a g e of t h e m ; a " p u s h " and a "pull" d y n a m i c was clearly evident throughout the period.5 The e c o n o m i c r e s p o n s e w a s t h e d e f a c t o i m p l e m e n t a t i o n of i m p o r t s u b s t i t u t i o n . T h i s w a s s e e n as a m e t h o d of r e d u c i n g d e p e n d e n c e on i m p o r t s and of t e m p e r i n g the f o r e i g n e x c h a n g e c r i s e s . T h e initial p h a s e s of i m p o r t s u b s t i t u t i o n

were

e n c o u r a g e d by t h e a g r i c u l t u r a l elites as a m e t h o d of f o s t e r i n g m o r e e f f i c i e n t , m o r e profitable, and m o r e stable agricultural exports; there was

never

e m p h a s i s o n t h e e x p o r t of m a n u f a c t u r e d g o o d s . I m p o r t s u b s t i t u t i o n w a s f u r t h e r e n c o u r a g e d by t h e s h o r t a g e of i m p o r t s c a u s e d by t h e b r e a k d o w n of

The Crisis of Argentine

Political Economy

13

trade during the Great Depression and World W a r II. Clearly, there was a " p u s h " for import substitution given the economic conditions. T h e " p u l l " was supplied by national political factors. In essence, political actors s u p p o r t e d these newly created sectors in order to gain popularity. The Unión Civica Radical ( U C R ) or Radical Party was the first to benefit f r o m the growing middle classes. Due to the new importance of this class as well as its significant representation in the military (a bastion of m i d d l e - c l a s s social mobility), election processes were changed and the Radicals c a m e to power. In essence, the middle sectors were incorporated into society and jointly ruled with the old agricultural elite or oligarchy. This period is now frequently referred to as the Primer Movimiento Histórico. The urban and, even m o r e notably, rural lower classes were still excluded, however. This group offered Juan Perón a tremendous potential resource that was ready to be tapped. In so doing, he changed the dynamics of Argentine politics and society. Peronism Juan D o m i n g o Perón began his political ascent by joining a military lodge, the G r o u p of United O f f i c e r s (GOU). This group was c o m p o s e d of likeminded officers, all middle-ranking like Perón, who were preoccupied with the course of Argentine politics. The group was worried, as had been their fascist counterparts in Europe, about growing labor militancy. Far worse than the i m m e d i a t e e f f e c t s were the potential ones that were so clearly evidenced, in the G O U ' s eyes, in the Soviet Union. With c o m m u n i s m on the rise on the old continent, socialist, anarchist, and syndicalist immigrants f r o m Italy and Spain were seen as dangerous. Many began to believe that these individuals should be silenced. Their potential followers, the poor and the rank-and-file union members, were to be rendered less susceptible to supporting such deviant ideologues. Many of these officers (including Perón) had been trained in fascist Italy and Germany, political systems for which they had much s y m p a t h y . Largely due to this, these officers resisted the growing pressure to join the allied war effort. The G O U overthrew the government of Ramón Castillo on 4 June 1943. Despite the fact that the outgoing government was "conservative" and had had the support of the old oligarchy or land-owning elites, parts of A r g e n t i n a ' s high society supported the coup: A feeling was growing that a new approach had to be taken in order to control and subdue the masses. This support further parallels European fascism, which was originally supported by much of the aristocracy as a method of retaining its power. T h e new government, in actions that set the precedent for many others that occurred during the period 1 9 6 6 - 1 9 8 9 , proscribed various political parties, banned several newspapers, and arrested many competing leaders. While all of this was occurring, however, internal dissension grew within the

14

Resolving

the Argentine

Paradox

ruling G O U , dissension that allowed Perón to a u g m e n t and to consolidate his power. H e w a s first appointed as the undersecretary of war. S o o n thereafter, h o w e v e r , he w a s put in charge of the central task of g a i n i n g control o v e r o r g a n i z e d w o r k e r s as the secretary of labor. It w a s clear at this point that Perón was an e m e r g i n g focal point of power. P e r ó n realized t h e potential for i m m e n s e political s u p p o r t a m o n g the thus far excluded masses. His strategy for gaining power, moreover, could be rendered all the more acceptable to the powerful classes, which could interpret his actions as geared t o w a r d s deactivating the socialist and anarchist threat. T h e labor secretary actively supported s y m p a t h e t i c u n i o n s with f a v o r a b l e mediation and fat contracts while repressing the radical or independent-minded u n i o n s that did not fall into line. T h r o u g h a series of political m a n e u v e r s , Perón tried to force s o m e sort of unity a m o n g the many unions. First, a law w a s p a s s e d that p a v e d the way f o r single u n i o n r e p r e s e n t a t i o n in e a c h industry; whereas in the past, several unions could compete f o r the support of metal-workers, for e x a m p l e , these unions were slowly consolidated into one. Similarly, Perón tried to f u r t h e r the vertical organization and unity of the various industry u n i o n s by forcing t h e m to act together through the n e w l y f o r m e d C o n f e d e r a c i ó n General de T r a b a j o ( C G T ) ; for e x a m p l e , Perón w o u l d often call for patriotic rallies that even the most i n d e p e n d e n t - m i n d e d union leaders were hard pressed to resist. M a n y within the military were fearful that the newly e m e r g i n g Peronist m o v e m e n t would g o too far, particularly as it seemed that Perón was poised to win the u p c o m i n g election slated for 1946. On 9 O c t o b e r 1945, J u a n Perón was arrested. However, Peronism had already grown too powerful to be so easily controlled. P e r ó n ' s supporters called strikes and filled the central P l a z a de M a y o d e m a n d i n g their l e a d e r ' s release. T h e military, f e a r f u l of unrest, relented. P e r ó n ' s election and subsequent accession to the presidency were all but assured. T h e new president redoubled his efforts to further his control a m o n g the w o r k i n g classes. R u r a l w o r k e r s w e r e e n c o u r a g e d to m i g r a t e to the cities where they could be more easily organized. An alliance was f o r g e d with the national b o u r g e o i s i e which, a l t h o u g h still w e a k , a c c o u n t e d f o r a g r e a t e r percentage of gross national product ( G N P ) than agriculture. 6 T h e traditional populist coalition of the bourgeoisie and the workers both profited as the n e w president increased w a g e s by 25 percent in 1947 and a f u r t h e r 2 4 percent in 1948. T h i s w a s f e a s i b l e d u r i n g easy import substitution w h e n i n c r e a s e d w a g e s translated into increased d e m a n d for locally produced goods. In s u m , both g r o u p s could simultaneously profit despite inherent tensions b e t w e e n labor and capital; workers profit f r o m the w a g e s and industrialists profit f r o m rapidly e x p a n d i n g d e m a n d . T h i s profit c o m e s at the cost of other sectors, h o w e v e r , most notably in Argentina at the cost of agriculture. In one stroke, P e r ó n was able to solve (temporarily) both of the p r o b l e m s of the liberal p h a s e — a n d he profited handsomely in the political sphere.

The Crisis of Argentine

Political

Economy

15

Just as the populist e c o n o m i c s came at the cost o f certain groups and, even more notable, at the cost o f future economic well-being, Perón gained political power at an immeasurable political cost to the future o f the country. Perón succeeded in splitting Argentine society in half. One group supported Perón. T h e other would do anything possible to ensure that neither Perón nor any Peronist successor would ever come to power. Argentina was divided into the Peronists and the anti-Peronists. This fracture caused great difficulty in the years immediately following P e r ó n ' s overthrow, as will be seen below. It is worth noting, however, that in other ways P e r ó n ' s presidency, particularly during the latter years, foreshadowed events to occur from 1966 to 1989 and began trends that only grew in magnitude. State policy became associated with e c o n o m i c largesse. Upon assuming the presidency, Perón found Argentina's coffers full from the profitable war-time agricultural sales; this money was lavishly spent on new government j o b s , higher wages, military projects, and public contracts that went well beyond even other populist experiments. Moreover, although some populist platforms were actually based on the belief that such policies were the best for encouraging development, this " e c o n o m i c " policy was clearly based on gaining political support. P e r ó n ' s e c o n o m i c advisers explained that he would later have economic problems, but this did not seem to daunt him in his constant quest for immediate popularity and support. Indeed, economic problems haunted Perón from 1 9 5 4 onward when he had to implement austerity measures sponsored by the International Monetary Fund ( I M F ) . This was the first time the government knowingly effected bad economic policy in an attempt to gain support. It hoped, o f course, that the disaster would strike some distant future government. Regarding political repression as well, the Perón government surpassed all precedents. Repression o f dissidents and adversarial political leaders grew greatly. W o r k e r s who did not offer allegiance to the government could be " r o u g h e d - u p " or fired. T h e government was quick to c e n s o r oppositional newspapers and emit rosy propaganda in the place o f the critical articles that had been erased. Intervention in the universities began in earnest for the first time, and packing the judicial system developed into a political art. By the time Perón had to implement austerity measures, he had lost much o f his support. T h e parts o f the old elite class that had supported him as a necessary evil to control worker radicalism had long since abandoned the Peronist bandwagon. T h e national bourgeoisie grew disenchanted with the recessionary e c o n o m i c policy and the associated increase in foreign penetration of the economy. On the political side, anti-Peronists were eager to exact revenge on the populist leader. Moreover, Perón's highly charismatic wife and political partner, E v a " E v i t a " Duarte de Perón, died, h e n c e eliminating a source o f sympathy and support. As would occur in many o f

16

Resolving

the Argentine

Paradox

the g o v e r n m e n t s under scrutiny, the president b e c a m e increasingly radical in his p o l i c i e s and p r o g r a m s so as to m o b i l i z e support; f o r e x a m p l e , Perón c h a l l e n g e d the C a t h o l i c C h u r c h , a very important and large anti-Peronist i n s t i t u t i o n , first by l e g a l i z i n g d i v o r c e , and then by f o s t e r i n g a g r e a t e r division b e t w e e n state and church. As would p r o v e to be the c a s e in later g o v e r n m e n t s as well, h o w e v e r , attempts to mobilize and activate widespread support w h e n the g o v e r n m e n t s ' legitimacy began to wane only precipitated and e x a c e r b a t e d the crisis. 7 In S e p t e m b e r 1955, P e r ó n ' s f e l l o w military o f f i c e r s o f f e r e d the p r e s i d e n t an u l t i m a t u m , in e f f e c t d e m a n d i n g his resignation, the alternative to which, they m a d e clear, would be civil war. Perón sailed off to Paraguay to begin his eighteen years of exile. P e r ó n left a r a d i c a l l y a l t e r e d c o u n t r y b e h i n d h i m , h o w e v e r . T h e incorporation of Argentine society had been completed. T h e working masses were a l m o s t u n a n i m o u s l y o r g a n i z e d into the union structure. At the same time, the national b o u r g e o i s i e ' s position in the e c o n o m y and political p o w e r had been solidified. It w o u l d be m i s l e a d i n g , h o w e v e r , to think that this n e w political s t r u c t u r e w a s stable. Society had largely been f r a c t u r e d into halves, one f a v o r i n g and o n e o p p o s i n g P e r ó n ; this, as will be d i s c u s s e d in the next s e c t i o n , c l e a r l y l i m i t e d p o l i t i c a l a l t e r n a t i v e s . M o r e o v e r , the s t a t e ' s r e l a t i o n s h i p with several key interest g r o u p s remained u n c l e a r ; in other words, the corporatist structure (to be discussed below) of the nation was at best o n l y partially c o m p l e t e . L a b o r u n i o n s , f o r e x a m p l e , w e r e largely dependent on the state's actions. However, T h e g o v e r n m e n t ' s d o m i n a t i o n o v e r the C G T , c o m p l e t e as P e r ó n w o u l d h a v e liked, d e s p i t e It is n o s e c r e t t h a t he h a d to i n t e r v e n e u n a u t h o r i z e d s t r i k e s by locals, w h o s e leaders improve salaries and working conditions.8

t h o u g h great, w a s n e v e r as his best e f f o r t s to a s s u r e it. m a n y t i m e s to t e r m i n a t e t o o k it u p o n t h e m s e l v e s to

S i m i l a r l y , Perón never progressed m u c h b e y o n d using the relatively blunt i n s t r u m e n t s of fiscal, m o n e t a r y , and e x c h a n g e rate policies to a f f e c t the b e h a v i o r s of the other e c o n o m i c groups. T h e nebulousness and divisiveness implicit in these c i r c u m s t a n c e s were amplified during the f o l l o w i n g years of political impasse.

The

Political

Impasse

Period

T h e political i m p a s s e period w a s ushered in with the military c o u p against Perón in 1955. T h e f u n d a m e n t a l trait of the w h o l e period ( 1 9 5 5 - 1 9 6 6 ) was the inability of all the administrations to find a stable political f o r m u l a due to the schism Perón created within Argentina. Given the great animosities he f o m e n t e d , Perón would not be able to return and lead a new g o v e r n m e n t for m a n y years. W i t h o u t his support, h o w e v e r , no g o v e r n m e n t could count on

The Crisis of Argentine

Political Economy

17

gaining a widespread base of support. T h e division of Argentine society into t w o fairly equal g r o u p s , both of which held to their v i e w s with passion, meant no political equation allowed for a solid majority. An a l t e r n a t i v e w o u l d h a v e been to p r o m o t e a P e r o n i s t l i k e populist m o v e m e n t u n d e r a n o t h e r ' s leadership. Such a solution could have fostered greater c o n s e n s u s a r o u n d policies similar to P e r ó n ' s . D u e to his attacks on the c h u r c h , his disregard f o r political opposition, his inefficient and corrupt g o v e r n m e n t , and his desire to c o n c e n t r a t e p o w e r in his o w n hands, many o p p o s e d P e r o n i s m m o r e because of its leader than because of its content; in o t h e r w o r d s , f o r m a n y the populist a p p r o a c h to A r g e n t i n e politics and e c o n o m i c s w a s not the p r o b l e m so m u c h as P e r ó n h i m s e l f . S u c h an alternative w a s not then feasible. For the years following P e r ó n ' s overthrow, the general retained a very c o m m i t t e d and large base of support that was completely unwilling to replace its leader; P e r ó n ' s mystique, p o w e r f u l even t o d a y , w a s far too great. I n d e e d , v a r i o u s a t t e m p t s by several R a d i c a l presidents d u r i n g this period to win over Peronist support failed. A s will be seen in C h a p t e r 3, even when Perón himself finally returned to impose his policies o n c e again, he failed. With the passing of easy import substitution, p o p u l i s m itself b e c a m e infeasible as the tensions between the bourgeoisie and the w o r k e r s grew too strong. In any case, Perón, clearly a p o w e r broker, was effectively blocked f r o m retaining national power in an open and stable way. M o r e o v e r , the military was still unwilling to rule the country during the impasse period. Certainly, military c o u p s had been c o m m o n and continued throughout the political impasse period. T h e coups, however, served more as a veto than a n y t h i n g else; the military o v e r t h r e w a g o v e r n m e n t w h e n the o f f i c e r s ( a l w a y s with varying degrees of support f r o m civilian leaders) felt that the e c o n o m i c and, more important, political objectives and results of the g o v e r n m e n t were h a r m f u l to the nation. On a practical level, this almost a l w a y s m e a n t m o v e s t o w a r d s reintegrating the Peronists. T h e goals of the c o u p leaders, unlike in the s u b s e q u e n t period, were never to take direct control of the g o v e r n m e n t apparatus. T h e military thus far was unwilling to p r o p o s e a n d i m p l e m e n t policies, c o n t e n t i n g itself with the ( o f t e n u s e d ) ability to veto those of others; the military as a p o w e r broker refused even to attempt to c h o o s e and to i m p l e m e n t policies. T h e s e factors resulted in frequent regime changes, all of which occurred with m a j o r l i m i t a t i o n s on t h e Peronist voice. A certain p a t t e r n set in. E l e c t i o n s w o u l d be held in which the P e r o n i s t s would be p r o s c r i b e d . A faction of the Radical Party would win with a plurality of 20 to 25 percent of the vote (Perón would a l w a y s order his followers to cast blank ballots, which would typically account for approximately 4 0 percent of the vote). T h e new g o v e r n m e n t , in planning for the next series of elections, could either attempt to c o n s o l i d a t e the a n t i - P e r o n i s t vote or else try to gain Peronist support generally by legalizing s o m e Peronist political parties and o r g a n i z a t i o n s .

18

Resolving

the Argentine

Paradox

Both alternatives were d o o m e d : T h e f o r m e r was blocked by other parties that r e f u s e d subordination, the latter by losing the original anti-Peronist vote or, m o r e frequently, by military coup geared toward continuing Peronist political exclusion. This repeated series of events is now referred to as "the impossible g a m e . " 9 T h e volatility w a s p u r p o s e f u l l y a u g m e n t e d by the exiled but still p o p u l a r and p o w e r f u l P e r o n as he battled against his o p p o n e n t s ; he did his best to e n s u r e that no g o v e r n m e n t was s u c c e s s f u l in order to f u r t h e r his h o p e s of o n c e again returning to power. In essence, the period was marked by rapid c h a n g e s in g o v e r n m e n t and lack of stability and continuity. M o r e o v e r , a l e g i t i m a c y p r o b l e m w a s d e v e l o p i n g as neither fixed elections nor f u r t i v e c o u p s c o u l d gain the a c c e p t a n c e , m u c h less support, of A r g e n t i n e civil society. T h e situation was m a d e even more u n m a n a g e a b l e and m o r e mercurial b e c a u s e of the e c o n o m i c situation. It b e c a m e more and more o b v i o u s that A r g e n t i n a had c o m e to a c r o s s r o a d s in its e c o n o m i c d e v e l o p m e n t . T h e i n c o r p o r a t i o n p e r i o d o c c u r r e d d u r i n g p r o g r e s s i v e p h a s e s of i m p o r t substitution—industrialization, the driving force behind the incorporation of the m i d d l e and w o r k i n g classes, w a s p r o m o t e d through e n c o u r a g i n g the national p r o d u c t i o n of p r e v i o u s l y imported products. T h e first stages of import substitution, the so-called easy import substitution, lead to national production of c o n s u m e r products that do not generally require high levels of t e c h n o l o g y . T h i s w a s the key to p o p u l i s m not only in A r g e n t i n a but t h r o u g h o u t Latin A m e r i c a , as h i g h e r w a g e s p r o m o t e d greater c o n s u m e r d e m a n d (for domestically produced consumer goods), hence allowing a m e e t i n g of the industrialists' and w o r k e r s ' interests. N o w that easy import s u b s t i t u t i o n had been e x h a u s t e d , h o w e v e r , a n e w e c o n o m i c plan w a s necessary for further development or "deepening." A s the e c o n o m y w a s still d e p e n d e n t on f o r e i g n capital g o o d s and t e c h n o l o g y , imports were essential. Yet the traditional agricultural e x p o r t s w e r e b e i n g starved off by increasing d o m e s t i c d e m a n d and g o v e r n m e n t neglect, if not outright abuse, of this sector. Under these circumstances, the w h o l e period w a s marked by rapid increases in G N P g r o w t h , f o l l o w e d by foreign sector difficulties, and finally by austerity measures. A " s t o p - a n d - g o " cycle was clearly visible during these eleven years. 1 0 President Arturo Frondizi ( 1 9 5 8 - 1 9 6 2 ) m a d e the most serious c o m m i t ment to resolving the e c o n o m i c quagmire. His period in g o v e r n m e n t , quite atypical f o r the impasse period, w a s marked by fast growth and large-scale m o d e r n i z a t i o n of the e c o n o m y . It was during F r o n d i z i ' s reign that t r e m e n d o u s foreign capital was attracted and new f o r m s of industrialization manifested t h e m s e l v e s (the m a n u f a c t u r e of automobiles, for example). N e w econ o m i c ventures, such as the first serious attempt to tap efficiently Argentin a ' s large oil r e s e r v e s , also b e g a n d u r i n g this p e r i o d . I n d e e d , F r o n d i z i o v e r s a w a d e e p e n i n g of i m p o r t s u b s t i t u t i o n and i n c r e a s e d f l o w s of investment.

The Crisis of Argentine Political Economy

19

Critically, however, Frondizi was unable to resolve the underlying political impasse. The president's party, Union Civica Radical Intransigente (UCRI), was, as can be seen from its name, a split-off faction of the Radical Party. Although elected by a commanding plurality for this period (45 percent of the popular vote 1 '). the UCRI faced the same limitations posed by "the impossible game." Frondizi attempted to secure reelection by gradually legalizing the Peronist party, and, it was hoped, integrating many of these Peronists into his own ranks. Particularly with Peron agitating from abroad, it was still impossible for this integration to occur without government policy taking on an overly Peronist appearance. Frondizi, as was predictable according to the rules of the times, was overthrown by a military coup towards the end of 1962. This failure subsequently overflowed into the economic field, reversing many of the gains made during these years. The stop-and-go cycle was not eliminated in the Argentine economy during Frondizi's four-year presidency. The impasse period caused significant and permanent changes in the political sphere, however. Most important was the decoupling of corporatist entities from particular political representatives. This decoupling was gradual, but seems to have been completed, or nearly so, by 1966. The best example was the notable and growing independence of the union movement vis-à-vis the Peronist political structure. Whereas during Peron's presidency the unions were vertically linked to his political apparatus (albeit tenuously so, as explained above), the unions grew astute and adept at defending their own interests during Peron's eighteen years of exile. No longer was it impossible for other political groups to gain support (although generally ephemeral) from the CGT. After so many years of exile, union rank-and-file as well as leaders began to see little value in hoping and agitating for Peron's return— there were easier and more efficient methods of improving work conditions and pay by pressuring other political groups that rotated in power, that is, the Radical Party and the various factions within the military. In sum, unions would bargain for better treatment by offering support for the government, support that was fundamentally conditional as it depended on continued "payment" in the form of economic advantages. The other pressure groups acted in a similar fashion. The national bourgeoisie solidified its contacts with the military and the other political parties. The old agricultural elite was thus no longer able to depend on the military for either unswerving, daily support or for taking the reins of government, so it was forced to search for other representatives. Foreign business groups, traditionally associated with the agricultural elite, found new champions in men like Frondizi. All of these groups would also offer conditional support to different governments. The transitory quality of the support throughout this period translated into recurring legitimacy crises for the governments. As a reaction, the various political groups, including the military, sought out contacts and sympathies among the pressure groups so

20

Resolving

the Argentine

Paradox

as to gain legitimacy and therefore political power. This problem w a s also to plague the corporatist breakdown period that is the focus of this study. If l e g i t i m a c y w a s the f u n d a m e n t a l p r o b l e m that the O n g a n i a , Peron, Videla, and Alfonsin g o v e r n m e n t s faced, why were they unable to solve the p r o b l e m ? W h a t w e r e the structural i m p e d i m e n t s to the f o r m a t i o n of a solution? T h e a n s w e r lies in corporatism.

Corporatist Theory C o r p o r a t i s m is a m e t h o d of representation through unique or " n o n c o m p e t itive" organizations, each of which c o r r e s p o n d s to a specific and d e f i n a b l e interest group. A central aspect of corporatism is that the corporatist entities represent as a single unit all actors with similar roles in the e c o n o m y or in society. Philippe C. Schmitter offers a more precise definition of corporatism as a s y s t e m o f i n t e r e s t r e p r e s e n t a t i o n in w h i c h the c o n s t i t u e n t u n i t s are organized petitive, categories,

into a limited hierarchically recognized

number

of

ordered

or l i c e n s e d

granted a deliberate representational

singular,

and (if

compulsory,

functionally not c r e a t e d )

by

noncom-

differentiated the

m o n o p o l y w i t h i n their

state

and

respective

c a t e g o r i e s in e x c h a n g e f o r o b s e r v i n g c e r t a i n c o n t r o l s on their s e l e c t i o n o f l e a d e r s and a r t i c u l a t i o n of d e m a n d s and s u p p o r t s . 1 2

Implicit in c o r p o r a t i s m is the fact that c o m m u n i c a t i o n b e t w e e n the c o r p o r a t i s t e n t i t i e s and the g o v e r n m e n t is direct. In o t h e r w o r d s , the corporatist entities pursue their goals through contacts with the g o v e r n m e n t , w h i c h , s i m i l a r l y , t r a n s m i t s its policy goals directly to the c o r p o r a t i s t entities. H o w a r d W i a r d a o f f e r s a m e t h o d of visualizing this structure in Figure 1.1. T h e s e contacts can be and often are institutional; they need not be, however. O f t e n corporatist entities are able to c o m m u n i c a t e their desires and concerns through social functions where various elites meet, through the media, and, in the e x t r e m e , through active resistance such as strikes on the part of unions. Indeed, it is important to keep in mind the fact that relations between the entities and the g o v e r n m e n t have always been largely "behind the scenes" in Argentina; this in n o way alters the validity of the f u n d a m e n t a l corporatist nature of the political structure. T h e corporatist structure had been forcibly created with the structure of the e c o n o m y as all the e c o n o m i c actors within a particular g r o u p w e r e f u n d a m e n t a l l y affected in a similar way by government policies. W h e n o n e actor f r o m this g r o u p c o m m u n i c a t e d with the g o v e r n m e n t , he s p o k e f o r all those in his group. M a n y institutions, official and merely social, allowed these economic actors to converse and prepare a united front; in the e x t r e m e , the m e d i a itself was enough of a m e a n s to foster a coh e s i o n . T h e f u n d a m e n t a l r e s u l t of this c o h e s i o n w a s t h e a b i l i t y to

The Crisis of Argentine

Figure 1.1

Political

Economy

21

Structure of Corporativi Entities

Source: H o w a r d W i a i ' d a . Corporatism and National Development W e s l v i e w P r e s s , B o u l d e r . 1981. p. 36. R e p r i n t e d with p e r m i s s i o n .

in Latin

America,

m o b i l i z e t h e m e m b e r s of t h e e c o n o m i c g r o u p to s u p p o r t or o p p o s e c e r t a i n p o l i c i e s . T h e a b i l i t y to m o b i l i z e in a c o n t r o l l e d a n d p l a n n e d identifiable

individuals

with

common

interests

r e s t s at t h e

manner base

of

c o r p o r a t i s m — t h e p r o c e s s e s of c o m m u n i c a t i o n , both b e t w e e n the g o v e r n m e n t a n d t h e g r o u p s a n d a m o n g t h e m e m b e r s of a g r o u p , are largely irrelevant. A s will b e a b u n d a n t l y e v i d e n c e d , A r g e n t i n e c o r p o r a t i s m w a s a l i v e a n d well d u r i n g t h e p e r i o d studied as all of the p r i m a r y c o r p o r a t i s t entities w e r e q u i t e w i l l i n g a n d a b l e to m o b i l i z e their rank and file. C o r p o r a t i s t t h e o r y a s s u m e s that t h e r e are t w o t y p e s of a c t o r s in political s o c i e t y . First, of c o u r s e , a r e the c o r p o r a t i s t entities. S e c o n d is t h e a u t h o r i t y , g e n e r a l l y in c o n t r o l of the state, that acts as a m e d i a t o r b e t w e e n the v a r i o u s g r o u p s — t h i s a u t h o r i t y is r e f e r r e d to as the " p o w e r b r o k e r " in this b o o k . T h e f u n c t i o n i n g of a c o r p o r a t i s t state d e p e n d s on the ability of t h e p o w e r b r o k e r to d e c i d e u p o n a c o u r s e of action ( o n e that, n e e d l e s s to say, is e c o n o m i c a l l y v i a b l e ) and then to i m p o s e this direction on t h e v a r i o u s c o r p o r a t i s t entities. T h e s t a t e f o s t e r s o b e d i e n c e on t h e part of t h e c o r p o r a t i s t e n t i t i e s t h r o u g h s o m e c o m b i n a t i o n of " i n d u c e m e n t s " a n d " c o n s t r a i n t s . " 1 3 I n d u c e m e n t s a r e g e n e r a l l y b a s e d on e c o n o m i c a d v a n t a g e s — o n the r e d i s t r i b u t i o n of n a t i o n a l i n c o m e in f a v o r of p a r t i c u l a r c o r p o r a t i s t e n t i t i e s , f o r e x a m p l e , by h i g h e r

22

Resolving

the Argentine

Paradox

profit m a r g i n s or w a g e s . Constraints are far more varied and can include the e l i m i n a t i o n of financial resources (union dues, for example), revocation of legal status, and, in m o r e e x t r e m e cases, physical violence or jailings. It is worth noting that the mixture of i n d u c e m e n t s and constraints can d e f i n e the type of corporatism. 1 4 T h e c o n c e p t s of i n d u c e m e n t s and constraints lead us to an essential c o n c l u s i o n : All actors of a particular e c o n o m i c g r o u p (leaving aside, f o r r e a s o n s that will b e c o m e o b v i o u s , entities not based u p o n e c o n o m i c a g g l o m e r a t i o n s ) are a f f e c t e d s i m i l a r l y — i n both o u t c o m e and d e g r e e — b y particular sets of g o v e r n m e n t policies. Moreover, the prominence and returns of e c o n o m i c actors, f r o m workers to corporations, are far more dependent on g o v e r n m e n t policy, or m a c r o e c o n o m i c s , than on the particular situation of the f i r m , or m i c r o e c o n o m i c s . As will be seen, for e x a m p l e , t h e p r o f i t margins of the agricultural sector depend far more on the e x c h a n g e rate and particular (export) taxes, which are controlled by the g o v e r n m e n t , than on investment levels. Given a particular set of economic conditions and policies, it is i m m e d i a t e l y c l e a r which e c o n o m i c groups will profit and which will lose. T h e similar e c o n o m i c situation c o n f r o n t i n g groups of easily identified and categorized e c o n o m i c actors necessarily creates a corporatist structure as the mutual interests of these a c t o r s will a l w a y s o u t w e i g h the mutual interests of any of t h e s e a c t o r s with an actor of a n o t h e r g r o u p . In the s a m e m a n n e r , d i f f e r e n c e s in e c o n o m i c w e l l - b e i n g a m o n g the individual a c t o r s d u e to i n v e s t m e n t l e v e l s and c h o i c e s will a l w a y s be m i n i m a l c o m p a r e d to d i f f e r e n c e s in i n c o m e resulting f r o m policy c h a n g e s . Given t h e s e f a c t o r s , t h e i n d i v i d u a l a c t o r s will act as a c o h e s i v e and easily m o b i l i z a b l e g r o u p . T h e e c o n o m i c s t r u c t u r e i n e v i t a b l y r e s u l t s in the f o r m a t i o n of c o r p o r a t i s t g r o u p s . T h i s f o r m a t i o n is essential f o r u n d e r standing the durability of the corporatist structure as well as the failure of all of the e c o n o m i c and political p r o g r a m s a t t e m p t e d t h r o u g h o u t the years studied. W i t h the u n a v o i d a b l e c o h e s i o n of corporatist entities in mind, it is e a s i e r to c o m p r e h e n d m a n y of t h e o t h e r a n o m a l i e s of c o r p o r a t i s m in Argentina. It b e c o m e s clearer h o w the corporatist structure influenced and e n d u r e d the various g o v e r n m e n t s despite the nebulousness of links between the g r o u p s and the state. T h e s e links were rendered o b s c u r e by various o c c u r r e n c e s to be d i s c u s s e d in later c h a p t e r s , o c c u r r e n c e s that i n c l u d e d g o v e r n m e n t i n t e r v e n t i o n s into m a n y of the corporatist institutions and m e r g e r s of i n s t i t u t i o n s that r e p r e s e n t e d d i f f e r e n t g r o u p s . D e s p i t e such c i r c u m s t a n c e s , the corporatist g r o u p s were able to continue to pressure the g o v e r n m e n t s and to act in decided and cohesive fashion. It would always be clear to the various presidents and ministers of economics which individuals, c o m p a n i e s , or institutions represented each entity. N e e d l e s s to say, as the e c o n o m i c actors have fewer interests in c o m m o n

The Crisis of Argentine

Politicai Economy

23

with the o t h e r a c t o r s of their c o r p o r a t i s t entity, and as individual actors b e c o m e less easily i d e n t i f i a b l e as pertaining to any particular entity, the corporatist structure breaks d o w n . As will be seen in the f o l l o w i n g chapters, this b r e a k d o w n occurred gradually during the period studied. T h e corporatist structure u n d e r O n g a n i a , at the very b e g i n n i n g of the period studied, w a s m u c h s h a r p e r a n d m o r e e x p l i c i t t h a n it w a s u n d e r A l f o n s i n , t h e last g o v e r n m e n t to s u f f e r f r o m this structural q u a g m i r e . Indeed, the culmination of the period resulted in a new type of structure under Carlos Saul M e n e m , w h i c h will be discussed later as a contrast; by 1989, the A r g e n t i n e P a r a d o x had been resolved. It should not be f o r g o t t e n that the relationship b e t w e e n p o w e r broker and entity is s y m b i o t i c ; j u s t as the g o v e r n m e n t a t t e m p t s to e n c o u r a g e certain c o m p o r t m e n t s on the part of various g r o u p s of e c o n o m i c actors t h r o u g h i n d u c e m e n t s a n d c o n s t r a i n t s , t h e c o r p o r a t i s t e n t i t i e s try to p e r s u a d e or, at times, to f o r c e the g o v e r n m e n t to adopt certain o u t l o o k s . O n t h e simplest level this o c c u r s through l o b b y i n g and p r o p a g a n d a , but o f t e n digresses to more f o r c e f u l and raw p r o c e s s e s such as general strikes or r e f u s a l to invest in the e c o n o m y . T h e d i a l o g u e b e t w e e n e a c h entity and the state can be v i e w e d as a negotiation in which each has particular g o a l s and d e p e n d s on t h e a c q u i e s c e n c e if not outright s u p p o r t of the other. T h e idea of n e g o t i a t i o n b e g s a q u e s t i o n r e g a r d i n g w h a t relation of p o w e r exists b e t w e e n the p o w e r broker and the various corporatist entities. C l e a r l y , there is a reciprocal d e p e n d e n c e b e t w e e n the two; in other words, a u t o n o m y s h o u l d be v i e w e d as a r e l a t i v e c o n c e p t within a c o r p o r a t i s t f r a m e w o r k . A c o n t i n u u m exists, o n e e x t r e m e of which r e p r e s e n t s state d o m i n a n c e , the other of which represents the a s c e n d a n c e of the corporatist entities; clearly, the e q u i l i b r i u m varies o v e r time and with c i r c u m s t a n c e s . T h e f o l l o w i n g c h a p t e r s will s h o w that t h e c o m m e n c e m e n t of e a c h g o v e r n m e n t represented a period of relative ascendance of the state o v e r the entities, an a s c e n d a n c e that inevitably reversed by the end of the regime. It is less clear w h e t h e r the relationship was f u n d a m e n t a l l y d i f f e r e n t a m o n g the v a r i o u s g o v e r n m e n t s as c o m p a r e d to that within the s a m e g o v e r n m e n t . It m i g h t be more apt to say that the corporatist structure merely collapsed at the end by 1989, not that it had evolved. All of a sudden, M e n e m ' s g o v e r n m e n t w a s in a structurally more p o w e r f u l situation. C o r p o r a t i s m is n o t h i n g m o r e n o r a n y t h i n g less t h a n a s y s t e m of g o v e r n i n g , h o w e v e r . Just as with any other system, if implemented correctly, it can w o r k . W h y , then, w a s the 1 9 6 6 - 1 9 8 9 period in A r g e n t i n a a c a s e of failed rather than functioning corporatism? T h e answer to this question lies in the relationship b e t w e e n and individual characteristics of A r g e n t i n a ' s p o w e r b r o k e r s and c o r p o r a t i s t entities. A n analysis of the o r g a n i z a t i o n s is n o w essential.

24

Resolving

the Argentine

Paradox

T h e Corporatist Entities Corporatist theory suggests that most interest groups can be a m a l g a m a t e d into a corporatist entity, ranging from labor unions to the Catholic Church. Indeed, A r g e n t i n a has a wide array of corporatist entities that arguably includes the church, student unions, and legal associations. However, this study will c o n c e n t r a t e on f o u r " p r i m a r y " corporatist entities, w h i c h cumulatively represent most economic actors: agriculture, labor unions, the national bourgeoisie, and the international bourgeoisie. The other corporatist entities will be referred to only occasionally. However, the reader familiar with A r g e n t i n e history should realize in the following chapters that the actions and dispositions of the "secondary" corporatist entities reinforce the results caused by the primary ones. The same course of events analyzed here for the primary entities could be attributed to and modeled for all corporatist entities in a m o r e c o m p l e t e — b u t c o m p l e x — s t u d y of which political e c o n o m y were just a single theme. For the purpose of this work, it is less important to understand these corporatist entities' precise outlooks and actions than to realize that they further compromise stability and legitimacy. It is tricky to determine exactly which official organizations represented each of the corporatist entities due to many of the anomalies discussed in the previous section. O f t e n , there was more than one representative for the entity. S o m e t i m e s affiliates of the larger entities took on more importance than the ostensible leader group, complicating the task of deciding which body really represented the corporatist group. The metal-workers union, for example, had at times led the Confederación General de Trabajo (of which it is a member) more than it has followed it. At times, distinct factions within a single organization represented different interests. All the same, the primary corporatist entities were traditionally and f u n d a m e n t a l l y represented by particular organizations: agriculture by the Sociedad Rural Argentina (SRA), labor unions by the Confederación General de Trabajo (CGT), the national b o u r g e o i s i e by the C o n f e d e r a c i ó n General E c o n ó m i c a ( C G E ) , and the international bourgeoisie by the Unión Industrial Argentina (UIA). For the sake of this work, these organizations will be referred to as the proper representatives of the respective corporatist groups. All of these corporatist entities shared several key characteristics. Most important a m o n g them is the fact that all of these primary corporatist entities were extremely powerful. In essence, each of the four entities had by 1966 refined methods of defending its self-interests in the face of opposition. Of central importance is the fact that each corporatist entity had developed a different method of self-defense; no c o m m o n institutions, market places, or f o r u m s were u s e d — q u i t e the contrary, each entity fought its battles on completely different turfs. One observer of Argentina has explained that each of these g r o u p s had a particular and unique "political c u r r e n c y . " 1 5 For e x a m p l e , u n i o n s utilized general strikes, whereas the agricultural elite

The Crisis of Argentine

Political

Economy

25

w i t h h e l d their p r o d u c t s . T h i s situation c o m p a r e s to p r a e t o r i a n i s t c o n d i t i o n s , w h i c h d e v e l o p e d t o w a r d t h e end of each r e g i m e studied, w h e r e " n o a g r e e m e n t e x i s t s a m o n g t h e g r o u p s as to t h e l e g i t i m a t e and a u t h o r i t a t i v e m e t h o d s f o r resolving conflicts."16 A m a j o r r e a s o n for t h e e f f i c a c y of t h e c o r p o r a t i s t e n t i t i e s ' r e s i s t a n c e lies in t h e i r m o b i l i z i n g abilities. T h e i n d i v i d u a l f i r m s and p e o p l e t h e s e e n t i t i e s r e p r e s e n t d e p e n d o n t h e l a r g e r a m a l g a m a t i o n s f o r their s t a n d a r d s of living; t h e r e f o r e , t h e s e individual a c t o r s are w i l l i n g and e v e n e a g e r to d o e v e r y t h i n g p o s s i b l e to e n s u r e the s u c c e s s of t h e c o r p o r a t i s t e n t i t i e s ' strategies. F u r t h e r , t h e corporatist entities are w e l l - o r g a n i z e d associations that are a l w a y s actively m o n i t o r i n g , if n o t h i n g e l s e , g o v e r n m e n t activity. In s u m , t h e p o w e r of t h e c o r p o r a t i s t e n t i t i e s is e n h a n c e d by their m o b i l i z i n g c a p a b i l i t i e s . A f o r m u l a can be offered: P o w e r of C o r p o r a t i s t Entity = P o w e r of F o l l o w e r s x M o b i l i z i n g C a p a b i l i t i e s It m u s t b e n o t e d that t h e p o w e r of the c o r p o r a t i s t e n t i t i e s r e s t e d in d e s t r u c t i v e rather than c o n s t r u c t i v e m e a n s ; in o t h e r w o r d s , the p o w e r of t h e c o r p o r a t i s t entities rested p r i m a r i l y in a threat to d i s r u p t the e c o n o m y . F e w o p t i o n s e x i s t e d b e t w e e n l o b b y i n g a g o v e r n m e n t and a c t i v e l y s u b v e r t i n g o f f i c i a l policy and n a t i o n a l stability. A c o n s e q u e n c e of this is t h e f a c t that t h e c o r p o r a t i s t entities c o u l d easily resist a n d d e s t r o y e c o n o m i c p o l i c i e s b u t c o u l d o n l y w i t h great d i f f i c u l t y e n c o u r a g e a c h o s e n or p o t e n t i a l c o u r s e of a c t i o n . T h e c o s t of i m p o s i n g o r o p p o s i n g p o l i c y is t h e s a m e , b u t t h e a d v a n t a g e s of p r e s s u r i n g f o r a d v a n t a g e s a r e f a r g r e a t e r than t h o s e r e s u l t i n g f r o m b l o c k i n g r e d i s t r i b u t i o n to o t h e r c o r p o r a t i s t e n t i t i e s . A n y p r o p o s e d r e d i s t r i b u t i o n , it is a s s u m e d , is paid for by t h e o t h e r three c o r p o r a t i s t entities. T h e a d v a n t a g e to t h e " w i n n i n g " g r o u p c a n t h e r e f o r e b e d e n o t e d as " x , " w h e r e a s the resultant c o s t to e a c h of the o t h e r entities is only x/3. C l e a r l y , it is m o r e e f f i c i e n t to p r e s s u r e f o r a c o u n t e r a c t i n g policy i n s t e a d of o p p o s i n g r e d i s t r i b u t i o n to a n o t h e r g r o u p . T h e result, as will b e s e e n , is a " N a s h s u b equilibrium."17 R e d i s t r i b u t i o n a l d e m a n d s both result f r o m and largely c a u s e the i m m e n s e p o w e r of t h e c o r p o r a t i s t e n t i t i e s . T h e d i s t r i b u t i o n of n a t i o n a l i n c o m e in A r g e n t i n a has had e x c e p t i o n a l l y w i d e fluctuations, w h i c h are generally c a u s e d by g o v e r n m e n t p o l i c y . T h e m a n i p u l a t i o n of a f e w c e n t r a l p r i c e s by t h e g o v e r n m e n t c a n and has c a u s e d t r e m e n d o u s v a r i a t i o n s in i n c o m e . B y altering t h e e x c h a n g e rate, w a g e s , or agricultural prices, all traditionally c o n t r o l l e d by t h e A r g e n t i n e g o v e r n m e n t , c e r t a i n s e c t o r s can i m m e d i a t e l y a n d d e c i s i v e l y b e n e f i t at the c o s t of o t h e r s . O n the o n e h a n d , the c o r p o r a t i s t e n t i t i e s h a v e b e e n able to m o b i l i z e m e m b e r s h i p m o r e easily b e c a u s e of t h e c o s t s i n v o l v e d in l o s i n g a p o l i t i c a l b a t t l e . At t h e s a m e t i m e , t h e p r o v e n p o w e r of t h e corporatist entities has r e i n f o r c e d the d e m a n d s of the rank a n d file.

26

Resolving

the Argentine

Paradox

A c o m p l e t e a b s e n c e o f a g r e e m e n t r e g a r d i n g the " c o r r e c t " distribution o f i n c o m e resulted in a c o m p l e t e lack o f a " t r a d i t i o n a l " o r b a s e l i n e d i s t r i b u t i o n . E a c h c o r p o r a t i s t e n t i t y w o u l d , q u i t e o b v i o u s l y , a c c e p t the m o s t f a v o r a b l e c o n d i t i o n s f o r its g r o u p as the " c o r r e c t " distribution. T h e result w a s an e n o r m o u s shortfall b e t w e e n the e x p e n d i t u r e d e m a n d e d o f and the r e c e i p t s r e c e i v e d b y t h e g o v e r n m e n t ; o n e a n a l y s t has a n a l y z e d this d e f i c i t and n a m e d it the " p o t e n t i a l " b u d g e t g a p . 1 8 In a c o r p o r a t i s t f r a m e w o r k , the type and a m o u n t o f p o w e r held by the e n t i t i e s in c o n j u n c t i o n with the tradition o f r e d i s t r i b u t i o n on t h e part o f the state resulted in a t y p e o f c o r p o r a t i s m b a s e d m o r e on ind u c e m e n t s than o n c o n s t r a i n t s . 1 9 A shift f r o m o n e to the o t h e r w o u l d ine v i t a b l y p r o v e to be q u i t e difficult. T h e d i s t r i b u t i o n a l c l a i m s resulted in the p o l i t i c i z a t i o n o f the c o r p o r a t i s t e n t i t i e s ; e a c h s o u g h t to win f a v o r with all o f the p o w e r b r o k e r s in o r d e r t o promote

its

political

program.

The

politicization

results

from

the

r e d i s t r i b u t i o n a l d e s i r e s o f the e n t i t i e s c o m b i n e d with the fact that they w e r e " d e - l i n k e d " f r o m any s i n g l e political p o w e r . In other words, to p r o m o t e t h e i r p o l i c i e s b e s t , the c o r p o r a t i s t e n t i t i e s s o u g h t to c o n v i n c e all p o l i t i c a l p o w e r b r o k e r s o f the j u s t i c e and e c o n o m i c value o f their v i e w s . D u r i n g the i m p a s s e period o f A r g e n t i n e h i s t o r y , most vertical c o n n e c t i o n s b e t w e e n e n t i t i e s ( l a b o r u n i o n s , f o r e x a m p l e ) and t h e i r c o r r e s p o n d i n g p o l i t i c a l r e p r e s e n t a t i v e s ( t h e P e r o n i s t P a r t y ) w e r e d e s t r o y e d . A f t e r e l e v e n years o f f e n d i n g for its interests without t h e s e links, e a c h c o r p o r a t i s t entity had d e v e l o p e d c o n t a c t s with all o f the p e r t i n e n t p o w e r b r o k e r s . W i t h i n e a c h p o w e r b r o k e r , in turn, t h e r e w e r e f a c t i o n s that w e r e s y m p a t h e t i c to e a c h o f the corporatist entities. O n e final c h a r a c t e r i s t i c a r i s e s out o f t h e s e o t h e r s : T h e r e l a t i v e l y

low

i m p o r t a n c e o f e c o n o m i c i n v e s t m e n t ( d e f i n e d as p r o m o t i n g e c o n o m i c returns through the c r e a t i o n o f w e a l t h ) as c o m p a r e d to political i n f l u e n c e ( d e f i n e d a s p r o m o t i n g e c o n o m i c returns t h r o u g h the redistribution o f i n c o m e ) . C a p i t a l i n v e s t m e n t and the p r o m o t i o n o f e c o n o m i c growth are d e c i d e d l y s e c o n d a r y to a t t e m p t i n g to a f f e c t a n d to d i s c e r n d e c i s i o n s r e g a r d i n g e c o n o m i c

redis-

t r i b u t i o n . T h e r e a s o n s f o r this s h o u l d b e c l e a r f r o m the a b o v e d i s c u s s i o n : ( 1 ) the returns f r o m i n v e s t m e n t a r e q u i t e s m a l l c o m p a r e d to the returns f r o m s u c c e s s f u l l y l o b b y i n g f o r r e d i s t r i b u t i o n and ( 2 ) any i n v e s t m e n t s a r e v e r y r i s k y , g i v e n the p o l i t i c a l i n s e c u r i t i e s . M o r e t e c h n i c a l l y , the e x p e c t e d return o f an i n v e s t m e n t is e q u a l to the v a l u e o f the i n v e s t m e n t , a s s u m i n g it is s u c c e s s f u l , m u l t i p l i e d by the p r o b a b i l i t y o f its s u c c e s s . In A r g e n t i n a , this last f a c t o r is f a r l o w e r and h a r d e r to predict due to the p o l i t i c a l s i t u a t i o n ; h e n c e , the e x p e c t e d return is r e d u c e d . T h i s reduction results in l o w e r rates o f i n v e s t m e n t . J u a n C a r l o s d e P a b l o e x p l a i n s the situation as it c o n f r o n t s the typical e x e c u t i v e : T h e C E O of the Argentine firm is so busy that he has no time to . . . work. It should be emphasized that this allocation of executive time and creativeness is absolutely rational from the private profit maximization

The Crisis of Argentine

Political Economy

27

point of v i e w . T h e C E O k n o w s that the f e a s i b l e increase in private profits that c o m e s out of technological i m p r o v e m e n t s , or cost reducing efforts, is far smaller than the increase that arises from k n o w i n g better, or k n o w i n g before, what the next m o v e of the g o v e r n m e n t is g o i n g to be and to act a c c o r d i n g l y . 2 0

O n a c o n c r e t e level, this p r o d u c t i v i t y i n c r e a s e s in C o m p a n y had not m a d e update its standard model,

m e a n t that w a g e increases w e r e n e v e r linked to A r g e n t i n a ; f o r similar r e a s o n s , the F o r d M o t o r the requisite i n v e s t m e n t in o v e r t w o d e c a d e s to the Falcon, a car originally designed in the sixties.

T h e only way to o v e r c o m e this aversion to i n v e s t m e n t in the longer term is by simultaneously e f f e c t i n g policies that will increase the e c o n o m i c returns of investment w h i l e assuring a stable and predictable policy for an extended period of time so that the real and perceived risks will be lowered. In the s h o r t e r t e r m , as will be seen, c o n s t r a i n t s m u s t be j u x t a p o s e d with i n d u c e m e n t s , a l w a y s within the general c o n t e x t of stability. T h e political stability is particularly important as stable political rules reduce the potential r e t u r n s — a n d l o s s e s — o f i n f l u e n c i n g or anticipating policy. In other words, the state must at the s a m e time e f f e c t a p a r t n e r s h i p with the b o u r g e o i s i e while retaining a certain independence f r o m it so as to avoid being pressured into increasing the b o u r g e o i s i e ' s profits solely through policy changes. T h e central point d u r i n g the period studied, h o w e v e r , is that while the e x c l u d e d g r o u p s i m m e d i a t e l y lower i n v e s t m e n t , the f a v o r e d g r o u p s will increase investment only after a significant time lag, given that, as shown in the f o l l o w i n g chapters, the g o v e r n m e n t could never e f f e c t i v e l y i m p l e m e n t c o n s t r a i n t s . B e f o r e the i n d u c e m e n t - b a s e d policy will b e c o m e e f f e c t i v e , e c o n o m i c actors must first feel assured of the stability of the c h a n g e s , a s e n t i m e n t that can only c o m e with the e x t e n d e d i m p l e m e n t a t i o n of and s u p p o r t f o r the p o l i c y . All of this is to say that redistribution of i n c o m e t h r o u g h increasing the profit m a r g i n s of s o m e g r o u p s results in increased resistance to policy ( f r o m the excluded groups) but n o t — i n the short t e r m — in increased i n v e s t m e n t rates even a m o n g the f a v o r e d g r o u p s . I n c r e a s i n g p r o f i t m a r g i n s results at first only in an e c o n o m i c t r a n s f e r and not in increased f u n d a m e n t a l e c o n o m i c activity (as d e f i n e d by potential and not actual G N P ) . T h e specific manifestations of each of the above characteristics are clearly visible in each of the primary corporatist entities.

La Sociedad

Rural

Argentina

L a Sociedad Rural Argentina, f o u n d e d in 1866, is the oldest of the corporatist entities. T h r o u g h o u t the liberal period, the S R A w a s a s s o c i a t e d with the highest Argentine classes, the derogatorily n a m e d "oligarquía" (oligarchy). Its m e m b e r s h i p w a s l i m i t e d to o n l y 2 , 5 0 0 of t h e w e a l t h i e s t o w n e r s of A r g e n t i n a ' s best agricultural land, the p a m p a s . C l e a r l y , until well into the 1930s, the S R A w a s a central point of p o w e r in Argentina, having provided,

28

Resolving

the Argentine

Paradox

f o r e x a m p l e , half of the c a b i n e t m i n i s t e r s b e t w e e n 1910 and 1 9 4 3 . 2 1 T h r o u g h o u t this period, agriculture's interests pervaded both the conservative parties as well as the still largely aristocratic armed services. O v e r t h e y e a r s , the S R A has r e m a i n e d the most c o h e s i v e of t h e corporatist entities, although it is not nearly so exclusive as it once was. A s should be clear in later chapters, however, the S R A has no longer been able to rely on military support f o r its policies, a fact that has f o r c e d t h i s corporatist entity, as the others, to lobby all power brokers. T h e agricultural s e c t o r ' s p o w e r has u n d e n i a b l y d e c l i n e d since the turn of the century a s industrialization has progressed and as new classes have been incorporated into A r g e n t i n e society. T h e lack of long-term stimuli to invest in A r g e n t i n a o v e r the past d e c a d e s is very clearly visible in this sector as the p a m p a s have significantly lower yields than c o m p a r a b l e properties in countries such as the United States or Australia. It must be mentioned, however, that this sector w a s particularly discriminated against during the incorporation period and during P e r o n ' s government. T h e S R A has very p o w e r f u l d e f e n s e strategies, h o w e v e r , that h a v e proven quite e f f e c t i v e in destabilizing unfriendly governments. This g r o u p ' s p o w e r c e n t e r s around its ability to withhold products f r o m the market. By w i t h h o l d i n g agricultural products f r o m the national markets, the S R A can have an i m m e d i a t e and significant effect on the Argentine rate of inflation. Meat production, in particular, plays a central role in this technique, as up to 4 0 p e r c e n t of the basket of g o o d s on which the c o n s u m e r price index is calculated has been accounted for by meat prices. Moreover, the agricultural bourgeoisie has a large degree of discretion regarding when to slaughter herds, particularly as c o m p a r e d to the discretion allowed in bringing p e r i s h a b l e a g r i c u l t u r a l p r o d u c t s to m a r k e t . T h e s e f a c t o r s have largely driven the increasing importance of herd breeding within the agricultural group. A g r i c u l t u r e is still considered the "traditional" export and accounts f o r s i g n i f i c a n t f o r e i g n c u r r e n c y e a r n i n g s . D u e to this, the S R A can f u r t h e r p r e s s u r e g o v e r n m e n t either by r e f u s i n g to export (bring their products to f o r e i g n m a r k e t s ) or else by r e f u s i n g to e x c h a n g e their foreign c u r r e n c y holdings into Argentine currency. Either of these actions can put tremendous pressure on the e x c h a n g e rate, which, in turn, is central to inflation and hence to all e c o n o m i c plans. By w i t h h o l d i n g herds for even one or two m o n t h s , i m m e n s e e c o n o m i c d a m a g e can be wreaked and therefore political pressure imposed. T h e policy goals of the S R A are relatively predictable. T h e S R A favors high a g r i c u l t u r a l prices and a low e x c h a n g e rate as m e t h o d s to e f f e c t a f a v o r a b l e i n c o m e d i s t r i b u t i o n f o r this g r o u p . 2 2 C l e a r l y , the S R A is v e h e m e n t l y against the export t a x e s — t a x e s that are quite similar to duties b u t l e v i e d on e x p o r t s r a t h e r t h a n i m p o r t s — o f t e n i m p o s e d on t h e agricultural sector starting with P e r o n ' s presidency. W a g e s should also be high so as to stimulate internal d e m a n d . On a structural level, the agricultural

The Crisis of Argentine

Political

Economy

29

s e c t o r h a s a l w a y s b e e n e a g e r f o r a n o p e n e c o n o m y so as to p r o f i t m o r e e a s i l y f r o m its i n t e r n a t i o n a l c o m p a r a t i v e a d v a n t a g e . F i n a l l y , t h e S R A is in f a v o r o f m i n i m a l g o v e r n m e n t i n t e r v e n t i o n in t h e n a t i o n a l a f f a i r s t h a t , f o r t h e m o s t p a r t , d o n o t b e n e f i t t h e a g r i c u l t u r a l s e c t o r ; i n d e e d , it w a s g e n e r a l l y t h e S R A that, t h r o u g h e x p o r t t a x e s on a g r i c u l t u r a l p r o d u c t s , s u b s i d i z e d s u c h p o l i c i e s that b e n e f i t e d t h e o t h e r c o r p o r a t i s t entities.

La Confederación

General

de

Trabajo

La C o n f e d e r a c i ó n General de T r a b a j o , on the other hand, favors policies a l m o s t d i a m e t r i c a l l y o p p o s e d to t h o s e f a v o r e d by the S R A . T h e

CGT,

o b v i o u s l y , f a v o r s h i g h w a g e s b u t d i s a g r e e s w i t h t h e S R A on all o t h e r c o u n t s . T h e t y p i c a l w o r k e r s ' s t a n d a r d of l i v i n g is a u g m e n t e d w i t h c h e a p e r p r i c e s . T h i s is e f f e c t e d t h r o u g h a h i g h e x c h a n g e r a t e that r e n d e r s not o n l y i m p o r t s r e l a t i v e l y c h e a p e r , b u t a l s o f o o d s t u f f s ( w h i c h a r e b a s e d on w o r l d p r i c e s in d o l l a r s ) . 2 ' ' M o r e o v e r , on a s t r u c t u r a l level t h e C G T f a v o r s a c l o s e d e c o n o m y ( s o that j o b s c a n n o t b e lost to o v e r s e a s c o m p e t i t i o n ) a n d w i d e s p r e a d government intervention, which benefits workers both directly

(through

pensions and other transfers) and indirectly (through g o v e r n m e n t contracts, w h i c h , in t u r n , s p u r d e m a n d f o r labor). T h e h i s t o r y of t h e C G T is a l s o q u i t e d i s t i n c t f r o m t h a t of t h e S R A . T h e f o r m e r c a m e i n t o e x i s t e n c e o n l y in t h e 1 9 4 0 s d u r i n g P e r ó n ' s r i s e to p o w e r . C l e a r l y , its o r i g i n s a r e c l o s e l y l i n k e d to t h e p o p u l i s t m o v e m e n t , as a r e its g o a l s . T h r o u g h o u t P e r ó n ' s p e r i o d in p o w e r as w e l l as in s u b s e q u e n t y e a r s , the C G T ' s p o w e r grew tremendously. M e m b e r s h i p increased from a small u n i o n i z e d b a s e to i n c l u d e n e a r l y all w o r k e r s in all i n d u s t r i e s . T h i s trend w a s s t r e n g t h e n e d b y t h e g r o w t h in t h e n u m b e r of j o b s in i n d u s t r y , t h e t r a d i t i o n a l d o m a i n of u n i o n s . B y c o n t r o l l i n g u n i o n d u e s a n d m a n y of t h e s o c i a l b e n e f i t programs, this organization has also b e c o m e extremely wealthy. T h i s innate p o w e r has been used to create a well-organized and cohesive c o r p o r a t i s t e n t i t y w i t h t h e c e n t r a l a b i l i t y to m o b i l i z e a n d t o f i n a n c e s t r i k e s . S t r i k e s , o f t e n in c o n j u n c t i o n w i t h f a c t o r y t a k e o v e r s , h a v e d e v e l o p e d into t h e p r i m e m e t h o d of d e f e n s e f o r t h e C G T , a n d o n e that is h i g h l y e f f e c t i v e g i v e n t h a t a g e n e r a l s t r i k e a l m o s t c l o s e s d o w n t h e c o u n t r y . S h o r t of t h e g e n e r a l s t r i k e , t h e C G T c a n p r e s s u r e g o v e r n m e n t s w i t h its c o n t r o l o f f i n a n c i a l r e s o u r c e s a n d its i m m e n s e m e m b e r s h i p that c a n b e c a l l e d u p o n f o r a n y t h i n g f r o m rallies t o p o s t i n g p o l i t i c a l a n n o u n c e m e n t s .

La Confederación

General

Económica

La C o n f e d e r a c i ó n General E c o n ó m i c a shares m a n y objectives with the C G T ; i n d e e d , it w a s a n a l l i a n c e b e t w e e n t h e s e t w o g r o u p s that f o r m e d t h e b a c k b o n e of p o p u l i s m . T h e C G T is in f a v o r of l o w a g r i c u l t u r a l p r i c e s , i m p l i c i t l y s u b s i d i z i n g t h e c o s t of w o r k e r s , a n d a h i g h e x c h a n g e r a t e , r e d u c i n g t h e c o s t of

30

Resolving

the Argentine

Paradox

i m p o r t e d c a p i t a l - a n d i n t e r m e d i a t e g o o d s on w h i c h t h e n a t i o n a l b o u r g e o i s i e is highly d e p e n d e n t . T h e C G E also agrees with the u n i o n s regarding the struct u r e o f t h e e c o n o m y : e x t e n s i v e p u m p - p r i m i n g i n t e r v e n t i o n on t h e part of the g o v e r n m e n t increases national d e m a n d , and a closed market protects national producers f r o m foreign products. Of course, the C G E and C G T diverge when it c o m e s to w a g e s — t h e n a t i o n a l b o u r g e o i s i e s u p p o r t s l o w e r w a g e s . T h e g e n e r a l c o n c o r d of t h e C G E a n d t h e C G T m i r r o r s t h e i r s i m i l a r histories. T h e C G E w a s f o u n d e d during P e r ó n ' s first presidency. T h e g r o u p b e c a m e closely associated with Perón and his populist policies: " W e were n e v e r o f f i c i a l l y P e r o n i s t , b u t t h e d i s t i n c t i o n w a s at t i m e s h a r d to m a k e . T h i s c o n t r a s t s w i t h t h e g r e a t p l u r a l i t y of p o l i t i c a l v i e w s n o w p r e s e n t in t h e C G E . " 2 4 In o t h e r w o r d s , a s w i t h t h e C G T , this o r g a n i z a t i o n h a s b e c o m e " d e l i n k e d " f r o m its l a r g e l y P e r o n i s t o r i g i n s . A s m i g h t b e e x p e c t e d , t h e n a t i o n a l b o u r g e o i s i e d e f e n d s itself

by

i n c r e a s i n g p r i c e s on its p r o d u c t s or, if n e c e s s a r y , w i t h h o l d i n g the p r o d u c t s . In t h i s m a n n e r , e c o n o m i c b o t t l e n e c k s a n d i n f l a t i o n a r y p r e s s u r e s b e g i n to p l a g u e t h e e c o n o m y q u i t e q u i c k l y . It s h o u l d b e n o t e d t h a t t h i s m e t h o d h a s p r o v e n h i g h l y e f f e c t i v e d e s p i t e v a r i o u s a t t e m p t s at p r i c e c o n t r o l s — w h e n

normal

m a r k e t s a r e r e g u l a t e d , p r o d u c t s " d i s a p p e a r , " o n l y to b e s o l d o n t h e b l a c k m a r k e t . M o r e o v e r , t h r o u g h c o n t r o l of t h e d e m a n d f o r l a b o r , a n d h e n c e t h e u n e m p l o y m e n t r a t e , t h e C G E h a d o f t e n b e e n a b l e t o a s s u r e its r e l a t i v e prosperity. O n a purely political level, the national b o u r g e o i s i e had, during t h e p e r i o d s t u d i e d , a p o w e r f u l r a l l y i n g call in c l a i m i n g t h a t its w e l l - b e i n g is e s s e n t i a l t o p r e v e n t t h e d e n a t i o n a l i z a t i o n of A r g e n t i n e i n d u s t r y . S u c h a n appeal

resonates with

t h e u n i o n s ( f e a r f u l of l o s i n g j o b s ) a n d

groups

( i n c l u d i n g t h e m i l i t a r y as w e l l as t h e P e r o n i s t a n d R a d i c a l p a r t i e s ) t h a t h a d felt n a t i o n a l l y c o n t r o l l e d i n d u s t r y w a s c e n t r a l f o r s e l f - d e f e n s e a n d e c o n o m i c a n d political i n d e p e n d e n c e .

La Unión

Industrial

Argentina

T h e f i n a l g r o u p is h e r e t e r m e d t h e international

bourgeoisie.

In reality, this

g r o u p h a s b e e n f a r m o r e m o t l e y t h a n t h e n a m e i m p l i e s , i n c l u d i n g not o n l y t h e i n t e r n a t i o n a l s e c t o r s ( m a i n l y s u b s i d i a r i e s of m u l t i n a t i o n a l s ) , but a l s o t h e financial sectors (both national and international), international organizations s u c h as t h e I M F , a n d t h e s e c t o r s of t h e n a t i o n a l b o u r g e o i s i e t h a t a r e e i t h e r i n t e r n a t i o n a l l y c o m p e t i t i v e ( p a r t s of t h e s t e e l - t u b e i n d u s t r y , f o r e x a m p l e ) o r are natural m o n o p o l i e s . All of these sectors share financial stability and e c o n o m i c strength and flourish when integrated with the world e c o n o m y . Similarly, the international bourgeoisie favors m i n i m a l g o v e r n m e n t activity o n t h e d o m e s t i c f r o n t . In y e t a n o t h e r s i m i l a r i t y w i t h t h e S R A , t h i s g r o u p also favors a low e x c h a n g e rate. H o w e v e r , the international sectors diverge f r o m the free-market-oriented

SRA

in f a v o r i n g l o w

a g r i c u l t u r a l p r i c e s ( f u r t h e r s u b s i d i z i n g labor c o s t s ) .

wages

and

low

The Crisis of Argentine

Political Economy

31

G i v e n the diversity of the international b o u r g e o i s i e , there are m a n y structures and m e t h o d s that are used f o r pressuring g o v e r n m e n t . T h e Union Industrial A r g e n t i n a h a s been the p r i m a r y p r e s s u r e v e h i c l e (and will be r e f e r r e d to in this w o r k as referring to the w h o l e of this group), although there have been other corporatist organizations that are generally used for the most basic level of lobbying the government. H o w e v e r , if g o v e r n m e n t p o l i c y is unacceptable for a prolonged period of time, l o b b y i n g g i v e s w a y to a wider political battle in which there are many w a y s to f i g h t . T h e s e can i n c l u d e i n v o l v i n g , for e x a m p l e , f o r e i g n e m b a s s i e s in Argentina, international credit organizations both public and private, and e v e n world o p i n i o n . 2 5

T h e U I A w a s r e n d e r e d e v e n m o r e p o w e r f u l b e c a u s e of its s h e e r i m p o r t a n c e within the A r g e n t i n e e c o n o m y . M a n y of the most a d v a n c e d and the most stable c o m p a n i e s have traditionally been subsidiaries of f o r e i g n industries. M o r e important, any significant d e e p e n i n g of the e c o n o m i c base and export-oriented d e v e l o p m e n t strategies require the active participation of this g r o u p .

Potential Alliances Between Corporatist Entities F i g u r e 1.2 o f f e r s a visualization of the corporatist entities and their salient characteristics. T h e potential alliances b e t w e e n any t w o of the corporatist entities are denoted by the connecting lines. T h e criterion is the c o n v e r g e n c e of interests as d e t e r m i n e d by c o m m o n e c o n o m i c goals, either of two of the three short-term goals ( e x c h a n g e rate, wages, and agricultural prices) or of one s h o r t - t e r m goal and both long-term o n e s . S u c h a c o n v e r g e n c e s e e m s theoretically logical; more important, h o w e v e r , is the existence of empirical e v i d e n c e of such alliances. Each of the three alliances was attempted during the period studied, and each failed. T h e failure of each of the a t t e m p t e d a l l i a n c e s raises m a n y questions. W h y d i d n ' t the alliances w o r k ? T o what extent did tensions grow between the c o l l u d i n g interests? In sum, why did these alliances remain potential instead of b e c o m i n g fully c o n s u m m a t e d ? T h e s e questions will all be addressed in the s u b s e q u e n t chapters. A conclusion that will be discussed after the case studies is w o r t h f l a g g i n g n o w , h o w e v e r : O n e of t h e c e n t r a l r e a s o n s f o r t h e b r e a k d o w n of c o r p o r a t i s m , that is to say t h e p a s s i n g of t h e structural i m p e d i m e n t s b l o c k i n g political and e c o n o m i c d e v e l o p m e n t , is the fact that all potential alliances resulted in failure. T h e b r e a k d o w n of these alliances proved highly costly to both of the colluding parties as well as to the country as a w h o l e . It might be said that each of the corporatist g r o u p s had g r o w n m i s t r u s t f u l of its potential partners, hence i m p e d i n g the reformation of these a l l i a n c e s . Yet n o o t h e r a l l i a n c e s a r e p o s s i b l e . W i t h i n t h e c o r p o r a t i s t

32

Resolving

Figure 1.2

Note:

the Argentine

Paradox

Characteristics of Corporatist Entities

Lines denote possible alliances.

f r a m e w o r k , as should b e c o m e o b v i o u s , an alliance is n e c e s s a r y not only to bring a p o w e r b r o k e r to g o v e r n m e n t but also to render an e c o n o m i c strategy f e a s i b l e . N o w that these a l l i a n c e s can no longer o c c u r , the very c o r p o r a t i s t structure has broken down. It is essential to note further that all o f the possible a l l i a n c e s are at least partially based on the redistribution o f i n c o m e through the manipulation o f s o m e c o m b i n a t i o n o f the e x c h a n g e rate, w a g e s , and a g r i c u l t u r a l

prices.

F i x i n g t h e s e rates, h o w e v e r , c o s t s the g o v e r n m e n t resources. M o r e o v e r , the state a l s o played a m o r e direct role in the redistribution o f i n c o m e through tax c h a n g e s , state contracts, and benefit programs. T h e necessary prerequisite f o r this redistribution is the e x i s t e n c e o f s o m e t h i n g to redistribute; in other words, s o m e source o f funding

must be found in order to b e a b l e to

i m p l e m e n t t h e s e p o l i c i e s . In part, the r e s o u r c e s for the favored c o r p o r a t i s t entities h a v e c o m e f r o m the e x c l u d e d o n e s ; a c l e a r e x a m p l e is the i m p l i c i t r e d i s t r i b u t i o n o f i n c o m e f r o m w o r k e r s to industrialists through

lowering

w a g e s . H o w e v e r , as will be d e m o n s t r a t e d , the c o r p o r a t i s t s y s t e m

was

dependent on the state finding other, more explicit sources o f revenues. T h e s e funds w e r e needed for everything f r o m paying for subsidies to b u y i n g dollars in order to stabilize the e x c h a n g e rate. T h e sources have been varied: from explicit taxes on certain sectors (such

The Crisis of Argentine

Political

Economy

33

as agriculture under O n g a n i a ) , to domestic savings in bank accounts that yielded negative real interest rates under Perón, to foreign debt under Videla, to simply printing money under Alfonsin. A second conclusion relating to the breakdown o f corporatism is the fact that such sources o f funds no longer exist. Each o f the governments spent resources. B y the end o f the process, however, all sources o f funds were cut off. T h e gradual impoverishment o f the e c o n o m i c groups in c o n j u n c t i o n with their abilities to defend their interests blocked direct appropriation from certain sectors. Inflation, used by almost all o f the governments, b e c a m e so exacerbated that individuals first would no longer accept negative interest rates and then would no longer be willing to hold local c u r r e n c y — l o c a l capital no longer exists, and any rapid increases in the money supply (using the printing press) will result only in hyperinflation. With all sources o f capital, both foreign and domestic, already tapped by 1 9 8 9 , there was no longer the possibility o f forming an alliance based on the redistribution o f funds (and hence perpetuating the corporatist structure), as the power brokers, who orchestrated the alliances,

successively

closed themselves o f f from all such sources.

The Power Brokers A " p o w e r b r o k e r " is any individual or organization that is widely accepted as b e i n g c a p a b l e o f taking c h a r g e o f the state apparatus and forming a government. O n c e in power, the power broker is responsible for mediating between the a b o v e corporatist entities, which, in a functioning corporatist structure, it is able to do. It is difficult to define which groups and individuals can be considered power brokers. There are three considerations that determine a power broker. T h e first is recent history. Groups that have recently been in power are clearly capable o f running a government. T h e second characteristic o f a power broker is public perception. Any government has to have at least initial respect and legitimacy from the corporatist entities and the population as a whole. I f a group is perceived by large sectors o f the country as being incapable o f being in government it is, de facto, incapable. Finally, and most important, a potential power broker must be able to ascend to government through s o m e p r o c e s s — t h e r e must be some way for the power broker to be chosen. It is essential to emphasize that the type o f process is irrelevant, j u s t so long as there is a process. In Argentina, there were three processes o f ascending to power: the military coup, through limited elections, and through open elections. T h e fact that no process was considered better than the others, that no process could

foster

competition

and

choice

rendered

all

three

processes

uninstitutionalized. No process o f choosing a government was less legitimate or better than any other process. As strange as it may sound, democracy need

34

Resolving

the Argentine

Paradox

not be the most legitimate nor even most acceptable (in the p o p u l a t i o n ' s e y e s ) f o r m of g o v e r n m e n t . A f u n d a m e n t a l aspect of the b r e a k d o w n of c o r p o r a t i s m in the period studied is the elimination of two of these methods and the institutionalization of the last. T h e r e w e r e three p o w e r brokers in Argentina during the period studied: the military, the U C R or Radical Party, and Juan Perón (after his death the Peronist or Partido Justicialista Party [PJ]). T h e methods of gaining o f f i c e a r e t h o s e listed a b o v e : t h e P e r o n i s t s t h r o u g h p o p u l a r mobilizations, the R a d i c a l s through circumscribed elections, and the armed forces through the military coup. For each process of taking the reins of government, there was only a single p o w e r broker. This is not inevitably the case; many parties can win open electoral contests in advanced democracies, for example. This fact m e a n t that the p o w e r broker w a s implicitly chosen when the decision was m a d e regarding the process of a s s u m i n g power; the actual coming to p o w e r w a s largely a formality. T h e fact that the military n o w is no longer a c o n t e n d e r for p o w e r c o m b i n e d with the fact that both the U C R and the PJ c o m p e t e in open e l e c t i o n s (as will be d i s c u s s e d later) has created a w h o l e new set of c i r c u m s t a n c e s . T h i s is one of the most p o w e r f u l p i e c e s of e v i d e n c e supporting the theory that the old corporatist structure has broken d o w n . T h e c o r p o r a t i s t entities can n o longer, by c h o o s i n g the rules of a s c e n d i n g to power, ordain the power broker. D e s p i t e these d i f f e r e n c e s , the p o w e r brokers shared many traits. T h e m o s t important w a s the lack of a stable and secure base of support within society and a m o n g the corporatist entities. As the corporatist entities were d e l i n k e d , the p o w e r brokers lost any stable grass-roots power. T h e Peronist b a n n e r ostensibly enveloped both the union m o v e m e n t and the political party as well as several other organizations. This, however, was a mere façade that hid a reality of deep divisions and antagonisms. For example, Perón himself was, as shall be seen, actively opposed by the "Peronist" Montonero terrorist group, and his government (after his death) lost even the support of the C G T . It should b e c o m e clear in the following pages that the p o w e r brokers had no control over the corporatist entities and were able to gain the latter's enduring support only with i n d u c e m e n t s . Far f r o m establishing any permanent links, t h e entities freely sought the m o s t a d v a n t a g e o u s bargain a m o n g all of the p o w e r brokers. T h e c o n s e q u e n c e s of this separation between corporatist entities and p o w e r brokers cannot be underestimated. First, it meant that the power broker w a s always in a relatively weak position as compared to the corporatist entities, even w h e n the g o v e r n m e n t w a s popular; the p o w e r broker in g o v e r n m e n t had n o way to m o b i l i z e the support it could find in society, w h i c h t h e r e f o r e lay latent. This lack of p o w e r base resulted in the need to w o o the support of the corporatist entities in order both to c o m e to power and to prevent an open political b a t t l e — a direct confrontation with the corporatist enti-

The Crisis of Argentine

Political Economy

35

ties, even w h e n f i r m l y in g o v e r n m e n t , could quite easily c a u s e the r e g i m e ' s d o w n f a l l . G o v e r n m e n t s f o u n d smooth sailing only so long as there w a s s o m e c o n c u r r e n c e of i n t e r e s t s . W i t h the aid of h i n d s i g h t , it is c l e a r that t h e c o n c u r r e n c e of interests actually w a s based u p o n creating stability, albeit temporarily. A new p o w e r b r o k e r c a m e to g o v e r n m e n t with, ostensibly, an e c o n o m i c plan, internal cohesion, and popular support. T h e s e factors, all f u n d a m e n t a l l y related to fostering a feeling of stability, were a l w a y s sufficient to reactivate the e c o n o m y . T h e clearest indicator of this w a s the fact that industry would a l w a y s work significantly u n d e r full capacity d u r i n g the t u m u l t u o u s end of e a c h of the g o v e r n m e n t s s t u d i e d . A s d e m a n d e v a p o r a t e d , as s u p p l i e s (particularly i m p o r t e d ones) did not arrive, and as w o r k e r s struck, both the d e m a n d and supply c u r v e s s h i f t e d significantly inward. With the return of stability, they w o u l d shift back o u t w a r d . T h e return of stability and the r e n e w e d confidence would repeatedly allow for a b o o m during the first phases of t h e i n c o m i n g g o v e r n m e n t ' s e c o n o m i c plan. In essence, actual G N P w a s p u s h e d far below its potential during the last phases of the tragic cycle. T h e m o s t tentative and e l e m e n t a r y a c t i o n s and c l a i m s by a n e w i n c o m i n g g o v e r n m e n t would allow e c o n o m i c activity to move back towards e q u i l i b r i u m , at a level far closer to the potential G N P . T h e s e b o o m s did not require increases in investment as the excess capacity already existed; indeed, t h e e x c e s s i n s t a l l e d c a p a c i t y i m p l i e d that i n v e s t m e n t w o u l d n o t b e f o r t h c o m i n g during these first years, if other factors remain unchanged. T h e initial b o o m a l w a y s allowed all of the corporatist entities to profit. As the e c o n o m y g r e w rapidly, the b o u r g e o i s i e (including the agricultural elite) profited f r o m h i g h e r d e m a n d , w o r k e r s f r o m h i g h e r real w a g e s and ( g e n e r a l l y ) a d e c r e a s e in u n e m p l o y m e n t , and e v e r y o n e b e n e f i t e d f r o m the a b a t e d inflationary spiral. W i t h very little ingenuity, the g o v e r n m e n t w a s able during this first p h a s e to better the lot of all the corporatist entities and h e n c e to assure its o w n popularity and legitimacy. T h e p r o b l e m inevitably c a m e a f t e r the r e a c t i v a t i o n . T h e b o o m i n g e c o n o m y , in c o n j u n c t i o n with limited i n v e s t m e n t , w o u l d bring new inflationary pressures. T h e lack of structural changes during the first period (when many leaders began to believe w r o n g l y that the e c o n o m i c p r o b l e m s would not be difficult to correct) led to a n e e d f o r m o r e serious structural c h a n g e s with the associated social costs. M o s t i m p o r t a n t , e x p e c t a t i o n s , so high d u r i n g t h e b o o m , c o u l d not b e satisfied. With the w a n i n g growth and mounting constraints, resistance to the e c o n o m i c plan coalesced. T h e e f f e c t i v e n e s s of the resistance sprung f r o m the interaction b e t w e e n the corporatist entities and the p o w e r brokers. During the impasse period, the t w o actors b e c a m e delinked, a fact that resulted in persistent contacts between each p o w e r broker and all of the corporatist entities. T h e power brokers hoped to p r o v e their g o v e r n i n g capabilities and gain the support necessary to c o m e to or r e m a i n in p o w e r . T h e c o r p o r a t i s t entities w e r e also e a g e r f o r these

36

Resolving the Argentine

Paradox

c o n t a c t s as t h e y w e r e e a g e r to find c h a m p i o n s for the p o l i c i e s t h e y w i s h e d to s e e i m p l e m e n t e d ; t h e y w a n t e d the p o w e r b r o k e r s to o f f e r t h e m i n d u c e m e n t s f o r w h i c h t h e y w o u l d c o m p e n s a t e with the d e s i r e d p o l i t i c a l s u p p o r t . T h e c o m m u n i c a t i o n e n c o u r a g e d the d e v e l o p m e n t o f f a c t i o n s w i t h i n e a c h o f the p o w e r b r o k e r s , e a c h o f w h i c h had p r i v i l e g e d r e l a t i o n s with and s y m p a t h i e s f o r a p a r t i c u l a r c o r p o r a t i s t e n t i t y . It w a s t h r o u g h t h e s e f a c t i o n s that the c o r p o r a t i s t entities and the p o w e r b r o k e r s c o m m u n i c a t e d . T h e c o e x i s t e n c e o f v a r i o u s f a c t i o n s within e a c h p o w e r b r o k e r c r e a t e d tremendous

problems,

however.

When

the

power

broker

was

out

of

g o v e r n m e n t , e c o n o m i c p l a n s w o u l d b e drawn up that a t t e m p t e d to satisfy all o f the c o r p o r a t i s t e n t i t i e s , as e a c h f a c t i o n was d e p e n d e n t on a d i f f e r e n t entity f o r s u p p o r t ; p r o m i s e s to r e d i s t r i b u t e i n c o m e to all o f the e n t i t i e s w e r e a c e n t r a l a s p e c t o f trying to return to g o v e r n m e n t and o f s a t i s f y i n g all o f the i n t e r n a l f a c t i o n a l l e a d e r s . M o r e i m p o r t a n t , w h e n the p o w e r b r o k e r w a s in g o v e r n m e n t , the p l e t h o r a o f f a c t i o n s c a u s e d p o l i t i c a l s t r u g g l e s and d e b a t e s within the p o w e r b r o k e r itself, as e a c h f a c t i o n fought to d e f e n d the interest o f its s u p p o r t e r s o v e r s o c i e t y at l a r g e and the o t h e r e n t i t i e s . I f a n d w h e n a r a t i o n a l e c o n o m i c p o l i c y w a s finally i m p l e m e n t e d ( i n e v i t a b l y to the pleasure o f s o m e a n d to the c h a g r i n o f o t h e r f a c t i o n s ) , the f a c t i o n a l s t r u g g l e w a s s u b m e r g e d . T h e e x c l u d e d f a c t i o n s d e v e l o p e d into s o m e t h i n g o f a s e m i l o y a l o p p o s i t i o n ; as s o o n as the e c o n o m i c p o l i c y f a l t e r e d , the e x c l u d e d f a c t i o n s w o u l d c r i t i c i z e the p o l i c i e s and e n c o u r a g e the adoption o f o t h e r s that would b e n e f i t their supporters. T h e p r e s s u r e on the f a c t i o n in p o w e r was a u g m e n t e d by the c o n t i n u e d m a n e u v e r i n g o f the other power brokers. Contacts persisted between

the

p o w e r b r o k e r s that w e r e out o f g o v e r n m e n t and the c o r p o r a t i s t e n t i t i e s that, g i v e n t h e traditional p o l i t i c a l i n s t a b i l i t y , w a n t e d to k e e p their o p t i o n s o p e n . U p o n t h e first s i g n s o f e c o n o m i c d i f f i c u l t i e s , the o t h e r p o w e r b r o k e r s w o u l d v o i c e t h e i r o p p o s i t i o n in b i d s to r e g a i n c o n t r o l o f the g o v e r n m e n t .

The

g o v e r n i n g f a c t i o n , due to t h e s e internal and e x t e r n a l p r e s s u r e s , c o u l d o n l y w i t h g r e a t d i f f i c u l t y ( i n d e e d , i f at a l l ) c o m p l e t e l y e x c l u d e a n y

particular

c o r p o r a t i s t e n t i t y , as this w o u l d i m p l y o f f e r i n g to o n e o f the o t h e r p o w e r b r o k e r s ( o r internal f a c t i o n s ) all o f the i m m e n s e p o w e r at the c o m m a n d o f the e x c l u d e d s e c t o r . I f the c o r p o r a t i s t entity s a w n o p o s s i b i l i t y o f g a i n i n g s w a y with o n e p o w e r b r o k e r , the g r o u p w o u l d h a v e no a l t e r n a t i v e but to resist the b r o k e r w h o l e h e a r t e d l y ; the g r o u p w o u l d be f o r c e d f r o m s e m i l o y a l o p p o s i t i o n to a c t i v e l y d i s l o y a l o p p o s i t i o n . The

need

to reform

the e c o n o m y

was

a central

force

behind

la

R e v o l u c i ó n A r g e n t i n a , as it w o u l d p r o v e to be f o r all the f o l l o w i n g g o v e r n ments. T h e corporatist breakdown period was also marked by a series o f s o c i a l p r o g r a m s , h o w e v e r . E a c h g o v e r n m e n t had s t r o n g i d e a s

regarding

m o r a l i t y and j u s t i c e , ideas that e a c h g o v e r n m e n t a t t e m p t e d to f o r c e upon the s o c i e t y at l a r g e . T h e i d e a s r a n g e d f r o m r e l i g i o u s d o c t r i n e t o

historical

i n t e r p r e t a t i o n o f the n a t i o n , f r o m p o l i t i c a l i d e o l o g y to p e r s o n a l m o r a l s . A l l

The Crisis

of Argentine

Political

Economy

37

the g o v e r n m e n t s here studied, for e x a m p l e , intervened to a greater or lesser extent in university curricula and the judicial system. T h e social p r o g r a m s w e r e inevitably i m p l e m e n t e d with the original e c o n o m i c p r o g r a m s . W i t h regard to this study, w h i c h , f o r the sake of retaining theoretical clarity, relegates these issues to a secondary ievel, it is i m p o r t a n t to realize that the social p l a t f o r m s in many w a y s mirrored the e c o n o m i c p r o g r a m s . As with e c o n o m i c issues, the concept of social policies w a s accepted and supported by a great many (secondary) corporatist entities, f r o m t h e c h u r c h to student unions. A s with the e c o n o m i c policies, these p r o g r a m s created a great deal of tension within the governing power broker as well as a m o n g t h e r i v a l r o u s c o r p o r a t i s t e n t i t i e s . Initially, the social p r o g r a m s , like the e c o n o m i c , would s h o w a fair degree of " s u c c e s s " as p o p u l a r public actions, if not attitudes, were altered. Inevitably, however, the social aspect would e x p l o d e — t h e g o v e r n m e n t ' s desire to depoliticize society, to e n c o u r a g e a single moral and ideological code, forced such resistance that n o degree of coercion could permanently suppress the opposition. This social battle, quite o b v i o u s l y , detracted f r o m the e c o n o m i c r e o r g a n i z a t i o n and a u g m e n t e d opposition to the g o v e r n m e n t . Each of the p o w e r brokers, when in p o w e r , by a t t e m p t i n g to f o r c e a political outlook on society, f u r t h e r r e d u c e d the g o v e r n m e n t ' s c h a n c e s of r e t a i n i n g l e g i t i m a c y and f u l l y i m p l e m e n t i n g an e c o n o m i c policy. G i v e n all of t h e a b o v e , it is easier to c o m p r e h e n d the f a i l u r e s of O n g a n i a , Peron, Videla, and Alfonsin: T h e failure of corporatism rests in the inability of the p o w e r brokers to intermediate between the corporatist entities w h i l e s i m u l t a n e o u s l y i m p l e m e n t i n g a rational p r o g r a m g e a r e d t o w a r d e c o n o m i c restructuring and political consolidation. This failure results f r o m the s k e w e d p o w e r relationship between the brokers and entities, as well as f r o m the internal d i v i s i o n s within the p o w e r brokers and the e x i s t e n c e of multiple "political c u r r e n c i e s " a m o n g the corporatist entities. W h y were the g o v e r n m e n t s , no matter what they tried, unable to overcome these p r o b l e m s ? W e r e the p r o b l e m s of the period here studied truly inevitable, caused solely by c o r p o r a t i s t structural p r o b l e m s ? W h a t should be d o n e n o w ? H a s the corporatist impasse finally destroyed itself, thus offering the opportunity for the creation of a new consensus in Argentina? T o answer these questions, we n o w turn to the b o d y of the work, a n a l y s e s of the f o u r g o v e r n m e n t s in question.

Notes 1 . T h e literature is b o u n d l e s s . S e e the notes for each of the individual chapters as well as the bibliography for an introduction to the sources available. 2 . On this point see, for e x a m p l e , Juan Carlos Portantiero, "Political and E c o n o m i c Crises in Argentina." 3 . José Alfredo Martinez de Hoz, personal interview.

38

Resolving

the Argentine

Paradox

4. This term, explained by Samuel Huntington in his book Political Order in Changing Societies, refers to periods when various interest groups confront each other "nakediy" with any and all resources they command from strikes to military coups. 5 . It must be noted from the outset that although there is agreement among a c a d e m i c s regarding the existence of a period of social incorporation and its effects, the period during which it began is subject to great debate. Although most analysts would point to the 1930s, the author is more persuaded by the arguments that incorporation began earlier, certainly by the late teens. Regardless of which decade is chosen, the argument, however, is the same. 6 . Gary Wynia, Argentina: Illusions and Realities, p. 52. 7 . This seems to be a valid conclusion under almost all conditions. For a comparative perspective on Chile, for example, see Henry A. Landsberger and Tim McDaniel, "Hypermobilization in Chile, 1970-1973." 8 . Gary Wynia, Argentina: Illusions and Reality, p. 61. 9 . This dynamic was excellently analyzed and named by Guillermo O'Donnell in his book Bureaucratic-Authoritarianism. 10. A more detailed economic explanation of the stop-and-go cycle can be found in "Social Conflict and Populist Policies in Latin A m e r i c a " by J e f f r e y Sachs. 1 I . Gary Wynia, Argentina: Illusions and Realities, p. 46. 12. Philippe Schmitter, "Still the Century of Corporatism?" pp. 9 4 - 9 5 . 1 3. The terms "inducements" and "constraints" come from the work by David and Ruth Berrins Collier. 14. David and Ruth Berrins Collier, " I n d u c e m e n t s V e r s u s C o n s t r a i n t s : Disaggregating C o r p o r a t i s m , " p. 979. 15. Eldon Kenworthy, "Argentina: The Politics of Late Industrialization." 16. Samuel Huntington, Political Order in Changing Societies, p. 196. 17. This point is well discussed in "Conflicto distributivo y deficit fiscal" by Daniel Heymann and Fernando Navajas, particularly pp. 3 2 2 - 3 2 3 . del pacto fiscal. 1 8. See Ricardo Carciofi, La desarticulación 19. David and Ruth Berrins Collier, " I n d u c e m e n t s V e r s u s C o n s t r a i n t s : Disaggregating C o r p o r a t i s m . " 2 0 . Juan Carlos de Pablo and Alfonso José Martínez, Argentina: 30 Years of Economic Policy, section II, p. 13. 2 1 . Gary Wynia, Argentina: Illusions and Reality, p. 160. 2 2 . In order to understand why this is so, it must be realized that upon selling their c o m m o d i t i e s internationally, the agricultural bourgeoisie has dollars. T h e return in local currency (the peso and later the austral) depends on how m a n y australs each dollar can purchase, in other words, on the exchange rate. 2 3 . For a full analysis of the beneficial effects of a strong currency for the working classes, please see Jeffrey Sachs, "Social Conflict and Populist Policies in Latin America." 2 4 . Juan Manuel Castillo, personal interview. 2 5 . Jorge Vives, personal interview.

2 Onganía and the Industrial Alliance, 1966-1973

The Onganía Presidency A military c o u p in 1966 overthrew President Arturo IIlía and brought retired G e n e r a l Juan C a r l o s O n g a n í a to the presidency. T h e military had had a long history of i n t e r v e n t i o n s into civilian affairs. H o w e v e r , this c o u p was f r o m the outset d i f f e r e n t f r o m previous military f o r a y s into the political scene. T h i s time the military was eager to hold the reins of power with decision and self-assurance. O n g a n í a ' s presidency was to be la Revolución Argentina. T h e reasons for this n e w - f o u n d determination were many. It had b e c o m e a b u n d a n t l y clear by 1966 that A r g e n t i n a had b e c o m e b l o c k e d , that an i m p a s s e existed i m p e d i n g e c o n o m i c d e v e l o p m e n t and political stability. T h e e c o n o m y was mired in the b o o m - a n d - b u s t cycle that b e g a n in the p o s t w a r period but showed no signs of abating. T h e result was relative decline and economic stagnation. On the political side, Perón remained an a w e s o m e force that continued to destabilize all g o v e r n m e n t s and political coalitions. Although these p r o b l e m s already existed in 1955 when Perón was exiled, both the p o w e r brokers and the corporatist entities hoped that c h a n g e could be e f f e c t e d gradually, that time would heal the w o u n d s of Argentine society. It was a s s u m e d , for e x a m ple, that P e r ó n ' s p o w e r would decline over the years, hence leading to greater political stability. All groups, including the Peronist unions that p i o n e e r e d a m o v e m e n t that called f o r "Peronism without Perón," believed and hoped that the p r o b l e m s w o u l d slowly be o u t g r o w n . It was felt that a relationship bet w e e n the e c o n o m i c s and the politics of the c o u n t r y existed, and, it w a s hoped, an i m p r o v i n g e c o n o m y would lead to greater political stability. T i m e , instead of alleviating these tensions, however, reinforced them. T h e relationship between politics and e c o n o m i c s indeed existed, but had the o p p o s i t e c o n s e q u e n c e s . A d y n a m i c was created w h e r e b y the e c o n o m y s t a g n a t e d in large part b e c a u s e of the political instability that r e n d e r e d i n v e s t m e n t s m o r e risky. T h e reduced investment in the e c o n o m y , in turn,

39

40

Resolving

the Argentine

Paradox

increased political instability as the m o r e restricted resources gave rise to m o r e f i e r c e and p a s s i o n a t e battles regarding the distribution of national i n c o m e . E a c h turn of the screw increased the tensions in both the political and economic spheres. Even given the unfavorable circumstances, President Illia did a poor j o b of t r y i n g to o v e r c o m e the i m p a s s e . His a d m i n i s t r a t i o n would s u g g e s t policies, to the acclaim of some corporatist entities and the dismay of others, but the policies w o u l d not be i m p l e m e n t e d ; universal disillusionment was the sole consequence. For example, a reform of state enterprises was proposed that centered around the rationalization of the state's railroads. The proposal, which w a s to save the state $ 4 0 0 million a year, 1 focused on eliminating excess w o r k e r s and hence was supported by business groups but angered the u n i o n s . Illia w a s u n a b l e or u n w i l l i n g to follow through on the proposal, h o w e v e r . A f t e r this f i a s c o , illia could never again look toward labor for support. At the s a m e time, the other corporatist entities grew disillusioned with the lack of d e t e r m i n a t i o n to i m p r o v e the e c o n o m i c situation. In this fashion, Illia fostered a n t a g o n i s m s between his Radical Party and all of the primary corporatist entities. Illia also fell into the perennial trap of attempting to reintegrate the Peronist Party. T h e ban on the Peronist Party was gradually lifted, allowing c o m p e t i t i o n d u r i n g interim and provincial elections. This act, which was inevitably g o i n g to lead to a Peronist victory d u r i n g the next presidential election, f u r t h e r a n t a g o n i z e d large sectors of society. By 1966, all of the p r i m a r y c o r p o r a t i s t entities, as well as society at large, were united in opposition to the g o v e r n m e n t . Each of the f o u r primary corporatist entities firmly believed by 1966 that f u n d a m e n t a l c h a n g e s had to occur within Argentina; no longer, it was agreed, w e r e m e r e c h a n g e s in a d m i n i s t r a t i o n s u f f i c i e n t . T h e rapid s h i f t s in g o v e r n m e n t (there had been five presidents since P e r ó n ' s exile) and e c o n o m i c stagnation had a d v e r s e e f f e c t s on all of the entities. Any gains that these entities had m a d e s e e m e d to be e p h e m e r a l : Increased w a g e s eaten up by inflation, or the nationalization of oil contracts granted to foreign firms just a f e w years earlier e x e m p l i f y the predicaments of the C G T and the international b o u r g e o i s i e . T h e s a m e general c o n d i t i o n s also a p p l i e d , h o w e v e r , to the national bourgeoisie and the agricultural elite. T h e foundation had been laid for support for la Revolución Argentina. T h e choice of the military as the power broker was obvious. T h e failures of F r o n d i z i a n d Illia had d i s c r e d i t e d all f a c t i o n s of the R a d i c a l P a r t y . S i m i l a r l y , the P e r o n i s t s o f f e r e d n o alternatives. Perón himself w a s still c o n s i d e r e d a d a n g e r o u s character w h o should not be allowed to return. His f o l l o w e r s w h o remained in Argentina had at various times attempted to f o r m a neo-Peronist party without Perón at its head. It was hoped that such a party could remain c o h e s i v e and c o m p e t e successfully in elections while a v o i d i n g the p r o s c r i p t i o n of the old Peronist party. T h i s strategy, h o w e v e r , utterly

Onganía

and the Industrial

Alliance

41

f a i l e d . P e r ó n w a s u n w i l l i n g to a l l o w a P e r o n i s t party to c o n t i n u e w i t h o u t his d e f a c t o l e a d e r s h i p ; his c o n t i n u e d p e r s o n a l p o p u l a r i t y a n d his p o l i t i c a l m a n i p u l a t i o n s p r e v e n t e d the creation of such a party o v e r his veto. W i t h b o t h t h e P e r o n i s t s and t h e R a d i c a l s u n a c c e p t a b l e a l t e r n a t i v e s , all the c o r p o r a t i s t entities l o o k e d t o w a r d t h e military. T w o f a c t o r s in t h e s e l e c t i o n of t h e military a r e c e n t r a l . First, as is t h e c a s e w i t h all c o u p s , t h e m i l i t a r y c a m e t o p o w e r in an u n i n s t i t u t i o n a l i z e d , i n d e e d , illegal m a n n e r — t h e m i l i t a r y t o p p l e d II lia a n d r e p l a c e d h i m w i t h O n g a n í a t h r o u g h a c o u p d ' é t a t . T h e r e f o r e , the w i d e s p r e a d s u p p o r t f o r this change

in g o v e r n m e n t

was always

implicit, the support for the

new

g o v e r n m e n t a s s u m e d but n e v e r e x p r e s s e d publicly or o f f i c i a l l y . T h i s d o e s not at all i m p l y that the m i l i t a r y t o o k p o w e r w i t h o u t r e g a r d to t h e f e e l i n g s of s o c i e t y at large and t h e c o r p o r a t i s t e n t i t i e s in p a r t i c u l a r ; q u i t e t h e c o n t r a r y , t h e c o u p o n l y o c c u r r e d w h e n the military leaders w e r e certain that there w a s g e n e r a l s u p p o r t f o r such action. 2 I n d e e d , O n g a n í a a s c e n d e d to t h e p r e s i d e n c y with s u p p o r t f r o m all s e c t o r s of society and all of the c o r p o r a t i s t entities. S e c o n d , the military f r o m the outset f e a r e d internal d i s s e n s i o n . I n d e e d , t h e c h o i c e of J u a n C a r l o s O n g a n í a , a m a n w i d e l y r e s p e c t e d in the military and w h o had f o u g h t f o r internal c o h e s i o n , r e f l e c t e d t h o s e fears. O n g a n í a had c h a m p i o n e d the " l e g a l i s t " g r o u p w i t h i n t h e m i l i t a r y , a g r o u p that s t r e s s e d o b e d i e n c e a n d i n t e r n a l c o h e s i o n . At t h e s a m e t i m e , his p o l i t i c a l

and

e c o n o m i c v i e w s w e r e a c c e p t a b l e to, if not f a v o r e d by, all. H e w a s a m o d e r a t e n a t i o n a l i s t in e c o n o m i c m a t t e r s , b u t at t h e s a m e t i m e b e l i e v e d that t h e liberals w e r e the e x p e r t s in this field; in o t h e r w o r d s , the n a t i o n a l i s t s t h o u g h t they h a d a s u p p o r t e r in O n g a n í a , and the liberals t h o u g h t they w o u l d b e a b l e to c o n v i n c e t h e n e w p r e s i d e n t to see the light. O n the political side, O n g a n í a had long argued against a coup and military intervention, proving

his

" d e m o c r a t i c " credentials, but had grown c o n v i n c e d of the need for f u n d a m e n t a l restructuring b e f o r e d e m o c r a c y could w o r k . W i t h such v i e w s , O n g a n í a gained support f r o m both interventionist and democratic officers. H e was the o b v i o u s c h o i c e f o r p r e s i d e n t not only b e c a u s e of his i m m e n s e a u t h o r i t y but a l s o b e c a u s e he r e p r e s e n t e d the best o p p o r t u n i t y to avoid internal c o n f l i c t . 3 T h e n e a r l y a l l - e n c o m p a s s i n g c o a l i t i o n w a s of c e n t r a l i m p o r t a n c e in c o m i n g to p o w e r . W i t h o u t this s u p p o r t , t h e m i l i t a r y c e r t a i n l y w o u l d h a v e b e e n m o r e hesitant to t a k e p o w e r , all t h e m o r e so c o n s i d e r i n g its intention of r e m a i n i n g in g o v e r n m e n t

f o r s u c h a l o n g p e r i o d of t i m e — t e n

years.

S i m i l a r l y , the very i d e a of e f f e c t i n g e l e m e n t a l c h a n g e c o u l d o n l y arise f r o m w i d e s p r e a d and d e e p c o n c e r n about the w o r k i n g s of Argentina. In other w o r d s , t h e a b i l i t y t o c o m m e n c e a p r o j e c t akin to la R e v o l u c i ó n A r g e n t i n a w a s contingent

upon support among the primary corporatist entities.

This

s u p p o r t clearly e x i s t e d a n d p r o v i d e d a n e c e s s a r y f o u n d a t i o n of stability that a l l o w e d a s m o o t h c h a n g e in g o v e r n m e n t s a n d t h a t f o s t e r e d

agreement

r e g a r d i n g t h e n e e d f o r a f u n d a m e n t a l r e s t r u c t u r i n g of A r g e n t i n e politics and economics.

42

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This same w i d e s p r e a d support, h o w e v e r , w a s the A c h i l l e ' s heel of the n e w regime. T h e alliance that the military brokered w a s f u n d a m e n t a l l y incongruous, as it included all of the primary corporatist entities, each of which had a different agenda. 4 T h i s disparity was not immediately perceived, h o w ever. O n g a n i a c a m e to p o w e r during a period of stagnation, not crisis as had been the case preceding the military coups in Brazil and Chile. O ' D o n n e l l has justly theorized that the relatively smaller problems c o n f r o n t i n g Argentina at the time of the military takeover translated into less initial concern regarding the e c o n o m y . 5 T h e belief that was c o m m o n during the impasse p e r i o d — t h a t A r g e n t i n a ' s problems were not deeply rooted and could easily be c u r e d — p e r sisted to a large degree within the military during the b e g i n n i n g of la R e v olución Argentina. O n g a n i a did not have the stimuli necessary to concentrate all of his efforts on restructuring the e c o n o m y . At times, indeed, he s e e m e d m o r e c o n c e r n e d with e n c o u r a g i n g " a p p r o p r i a t e " moral c o n d u c t than with solving the structural p r o b l e m s blocking the economy. T h e links between the various factions of the military and the corporatist entities further impeded the implementation of a c o m p r e h e n s i v e and rational e c o n o m i c policy; e n o r m o u s pressure was brought to bear on O n g a n i a both within the military and f r o m the corporatist entities f o r widely d i v e r g e n t e c o n o m i c p r o g r a m s . T h e internal factions within the military would h a v e caused this result under any circumstances. Given the military's willingness to m a k e special c o m m i t m e n t s to ensure greater support for a c o u p during the last d a y s of the Illia r e g i m e , O n g a n i a operated u n d e r especially stringent limitations and acute pressure. T h e initial results w e r e reminiscent of the Illia r e g i m e . O n g a n i a first o f f e n d e d the unions and then, in a failed attempt at reconciliation, worried the b u s i n e s s c o m m u n i t y . As a part of the first e c o n o m i c phase, the g o v e r n m e n t d r e w u p and began to i m p l e m e n t a rationalization p r o g r a m that called f o r large-scale layoffs at the port of Buenos Aires and for sugar-mill closings in the province of T u c u m á n . T h e unions began to feel that they could not look to O n g a n i a f o r s u p p o r t . In an attempt at reconciliation in A u g u s t 1966, h o w e v e r , the g o v e r n m e n t intervened in contract negotiations involving the textile workers' and metal workers' unions, which resulted in substantial real w a g e increases; needless to say, the owners of capital protested the increased costs. 6 T h e private sector was rendered even more skeptical after a 30 percent w a g e increase had been o f f e r e d to g o v e r n m e n t e m p l o y e e s , an increase that inevitably served as a guideline for private-sector wage negotiations. A n o t h e r s h i f t in policy o c c u r r e d w h e n the g o v e r n m e n t d e v a l u e d the p e s o by 6.5 p e r c e n t in o r d e r to satisfy the exporting business c o m m u n i t y d e s p i t e the protests of the unions. 7 Eldon Kenworthy s u m m e d u p the situation well in an article at the time; " [ S ] i x m o n t h s a f t e r c o m i n g to p o w e r the j u n t a increasingly resembles its civilian predecessors. Like them, it is dependent on the c o m p l i a n c e of various groups for i m p l e m e n t i n g policies, and the price they extract f o r their cooperation often has the e f f e c t of neutralizing these

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p o l i c i e s . " 8 In o t h e r w o r d s , each of t h e c o r p o r a t i s t entities l o b b i e d f o r e c o n o m i c rewards. H o w e v e r , given that all of the corporatist entities did the s a m e , the result was contradictory and irrational h a n d l i n g of the e c o n o m y . N o n e of the corporatist entities w a s able to consolidate the a d v a n t a g e s f r o m any of the f a v o r a b l e policies. This led to d e m a n d s for more political f a v o r s f r o m all sectors, d e m a n d s that were often i m p l e m e n t e d but that w e r e not perceived on an e c o n o m i c level by the various groups. T h e m a c r o e c o n o m i c c o n s e q u e n c e s , h o w e v e r , w e r e o b v i o u s to all. Despite the fact that an improved e c o n o m y w a s a central, if not the essential, j u s t i f i c a t i o n f o r t h e c o u p against 111ia, the last six m o n t h s of 1966 s h o w e d n o i m p r o v e m e n t in the e c o n o m i c scene. I n v e s t m e n t remained stagnant and the e c o n o m y s h o w e d no signs of growing. A restructuring of the e c o n o m y , w h i c h w a s so desired by the corporatist entities, w a s not occurring at all. P e r o n i s t and R a d i c a l leaders began to m a k e calls f o r n e w elections. Six m o n t h s after the coup, the military g o v e r n m e n t w a s facing the b e g i n n i n g s of a l e g i t i m a c y p r o b l e m . T h i s , in turn, w a s r e f l e c t e d within the military e s t a b l i s h m e n t which, it w a s rumored, set a d e a d l i n e within which O n g a n i a had to prove his policies successful or face an internal coup.

The Tentative Alliance O n g a n i a turned to the e c o n o m i c liberals, those he considered experts in this f i e l d , f o r h e l p . W i t h i n the military, liberals b e c a m e m o r e p o w e r f u l as nationalist-oriented generals were retired. T h e whole cabinet was reshuffled, r e f l e c t i n g the n e w d i r e c t i o n of the g o v e r n m e n t . M o s t i m p o r t a n t , a n e w e c o n o m i c s minister, Adalbert Krieger Vasena, was appointed. K r i e g e r V a s e n a w a s an e c o n o m i c liberal, o n e a s s o c i a t e d with and s y m p a t h e t i c t o w a r d s t h e U I A . D e s p i t e this i d e o l o g i c a l and p r o f e s s i o n a l c o n t a c t with the U I A , h o w e v e r , his a p p o i n t m e n t cannot be interpreted as a full-scale alliance between the international bourgeoisie and the g o v e r n m e n t . T h e shift in c o u r s e w a s d u e to and clearly r e f l e c t e d O n g a n i a ' s n e e d f o r e c o n o m i c results instead of faith in or unanimity about the liberal e c o n o m i c p r o g r a m . T h e military w a s far f r o m united in the choice of Krieger V a s e n a , and, of c o u r s e , the c o r p o r a t i s t entities not in a g r e e m e n t with the liberal ideology w e r e in opposition (labor w a s most distressed, whereas the national bourgeoisie and the agricultural elite were tentatively in f a v o r of the change). In o t h e r w o r d s , the military c h a r t e r e d o n l y a tentative c o u r s e r e g a r d i n g e c o n o m i c p o l i c y d e s p i t e its r e c o g n i t i o n that the first f e w m o n t h s of la Revolución Argentina w e r e a total failure. S e v e r a l l i m i t a t i o n s w e r e p l a c e d on K r i e g e r V a s e n a , a s o - c a l l e d " p r a g m a t i c liberal" w h o , O n g a n i a a s s u m e d , w o u l d be willing to i m p l e m e n t less than strictly o r t h o d o x policies. O n g a n i a created an o f f i c e through which all legislation had to pass; the p u r p o s e of this o f f i c e w a s to accord " a veto

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o v e r all p r o p o s e d g o v e r n m e n t policies." 9 It was created, of course, m u c h to the chagrin of the e c o n o m i c s team. Further, Krieger V a s e n a had to agree to certain nationalist goals regarding e c o n o m i c policy: U n e m p l o y m e n t was to r e m a i n l o w , a r e c e s s i o n w a s to be a v o i d e d , and u n i o n s w e r e not to be systematically " a t o m i z e d " as was advocated by the orthodox liberal groups. M o s t important, Krieger V a s e n a had to foster immediate results—legitimacy was already being questioned and Ongania was working under a deadline. B e f o r e Krieger Vasena was even able to announce an economic program, l a b o r b a l k e d . E m b o l d e n e d by its l o n g - t i m e ability to gain c o n c e s s i o n s through confrontation, the unions brandished their weapons (national strikes and p o p u l a r m o b i l i z a t i o n s ) against the a p p o i n t m e n t of a liberal, albeit a " p r a g m a t i c " one. In February 1967, just o n e month after the appointment of K r i e g e r V a s e n a , the union leadership devised the Plan de Acción (Plan of Action). T h e tactics to be used were quite similar to those used against Illia in 1964 in the Plan de Lucha (Plan of Resistance) and f r o m which Illia never c o m p l e t e l y recovered. T h e plan was predicated u p o n exploiting the links between the C G T and the more sympathetic sectors of the military. Vandor [head of the CGT] reasoned that the nationalists, then locked in battle with the orthodoxos [the liberals] within the state and lacking support in public opinion, would be forced to either adopt a more conciliatory stance or resort to violent repression, further eroding their already narrow political base. The vandoristas believed [they could] perhaps cement a more favorable modus vivendi with Ongania. 10

In o t h e r w o r d s , the C G T a t t e m p t e d to take a d v a n t a g e of the legitimacy p r o b l e m s to f o r g e an alliance with the government. V a n d o r ' s line of reasoning was cogent: T h e sympathetic sectors of the m i l i t a r y w e r e e a g e r to a v o i d a s h o w d o w n with the labor m o v e m e n t . H o w e v e r , in this instance the liberal sectors had the upper hand. T h e r e was a clear need to improve the e c o n o m i c situation. D u e to the new appointments within the military, the liberals were at least temporarily in control. Finally, Ongania, w h o s e deadline was not yet approaching, c a m e d o w n this particular t i m e on the liberals' side. In society, the other three corporatist entities still tacitly supported the g o v e r n m e n t and felt that the military o f f e r e d the best c h a n c e f o r f u n d a m e n t a l change. In sum, O n g a n i a ' s government still had the u p p e r hand in dictating policy at this early point of la Revolución. U p o n the urging of the head of the National Security Council, General O s i r i s V i l l e g a s , and with the s u p p o r t of the e c o n o m i c s t e a m and the international b u s i n e s s c o m m u n i t y , the g o v e r n m e n t retaliated against the C G T with determination. Several unions were taken over (the leaders were replaced with g o v e r n m e n t appointees), state e m p l o y e e s were w a r n e d that adherence to the strike would result in automatic dismissal, and the very legal status a n d g o v e r n m e n t sanction of several of the u n i o n s w e r e o p e n l y q u e s t i o n e d . M o s t i m p o r t a n t , h o w e v e r , w a s the partial (with threats f o r

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c o m p l e t e ) elimination of the u n i o n s ' i m m e n s e financial r e s o u r c e s through the freezing of s o m e of the unions' assets and the elimination of e m p l o y e r s ' obligatory 1 percent of b a s e salary c o n t r i b u t i o n s . T h e m e t a l l u r g i c a l and textile u n i o n s alone w e r e cut off f r o m a p p r o x i m a t e l y $ 2 0 0 , 0 0 0 a m o n t h because of this last c o u r s e of a c t i o n . " T h e union leadership had no option but to capitulate. T h e s t a t e ' s actions against the C G T w e r e not, h o w e v e r , m a r k e d with a degree of resolution c o m m e n s u r a t e with a g o v e r n m e n t that w a s united about and c o n v i n c e d of the e c o n o m i c plan. T h e implicit goal of this intervention w a s not the c o m p l e t e atomization of the labor m o v e m e n t as w a s desired by the liberal sectors of the military and the liberal corporatist entities. Instead, the actions belied a desire to restrain instead of to dismantle the C G T so as to i m p l e m e n t a nominally liberal e c o n o m i c p r o g r a m . Physical repression, f o r e x a m p l e , w a s avoided if at all possible, unlike in Brazil and Chile. T w o c e n t r a l p o i n t s can be g l e a n e d f r o m the g o v e r n m e n t ' s e a r l y experiences with the C G T , however. First, at least toward the b e g i n n i n g of the r e g i m e , the state w a s relatively a u t o n o m o u s in relation to the labor m o v e m e n t . T h e l i m i t e d a c t i o n s t a k e n a g a i n s t the C G T w e r e h i g h l y s u c c e s s f u l , and all indicators suggest that attempts to a t o m i z e the u n i o n s would also have been. Second, O n g a n i a ' s policies still reflected attempts to find c o m p r o m i s e s . N e e d l e s s to say, the internal divisions within the a r m e d forces and the still a w e s o m e power of the corporatist entities d e t e r m i n e d this " g o e a s y " a p p r o a c h . T h e result, h o w e v e r , w a s d i s a s t r o u s — t h e g o v e r n m e n t e x p e n d e d m o r e resources on attempting not to overly o f f e n d any group than on assuring cogent e c o n o m i c policy. T h e g o v e r n m e n t w a s unable (or unwilling) to i m p l e m e n t a consistent policy regarding the C G T . Clearly, labor was not a favored entity within the e m e r g i n g e c o n o m i c a l l i a n c e . At the s a m e t i m e , the C G T w a s n e i t h e r atomized nor well manipulated. For the first years of the e c o n o m i c program, collective bargaining was prohibited, and wage differentials between more and less productive sectors of the economy expanded. Both of these policies could be seen as methods of dividing the working class and encouraging differences a m o n g them. At the same time, however, w a g e s within an industry were still generally set for all c o m p a n i e s through industrywide labor negotiations. This w a g e agreement p r o m p t e d divisions within the business elite along the lines of the national and international b o u r g e o i s i e s . T h e latter w e r e f a r m o r e c a p a b l e of a b s o r b i n g labor costs than the f o r m e r , t h u s f o s t e r i n g d i f f e r e n t reactions to w a g e levels. T h e u n i f o r m regulation reduced the competitiveness of the e c o n o m y as a whole. M o r e important was the fact that this process of w a g e s e t t l e m e n t s p r o m o t e d c a m a r a d e r i e a m o n g the w o r k e r s in the s a m e industry, if not across industries, and e n c o u r a g e d a united o u t l o o k . W h e n labor t e n s i o n s w e r e to e x p l o d e , this c o n d i t i o n resulted in a c o o r d i n a t e d offensive on the part of the workers across c o m p a n i e s and industries. T h e e c o n o m i c s t e a m , d u e to restrictions i m p o s e d by f a c t i o n s of the

46

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m i l i t a r y , did not f r u i t f u l l y take a d v a n t a g e of divisions within the labor m o v e m e n t . 1 2 T o better u n d e r s t a n d the situation, we should look at the v a r i o u s s u b d i v i s i o n s w i t h i n t h e l a b o r m o v e m e n t . A very small a m a l g a m a t i o n of u n i o n s , t h e c o l l a b o r a t i o n i s t s , were, as their n a m e implies, w i l l i n g t o w o r k w i t h t h e g o v e r n m e n t and s u p p o r t the g o v e r n m e n t ' s e c o n o m i c and political policies. This g r o u p obviously tried to m a x i m i z e the b e n e f i t s f o r their rank and file, but at the s a m e time would o f f e r minimal opposition to the g o v e r n m e n t . At t h e other e x t r e m e w e r e those union leaders opposing the O n g a n i a r e g i m e itself, no matter what policies it implemented. They often hoped for a socialist or c o m m u n i s t revolution to replace the whole e c o n o m i c structure and w e r e w i l l i n g to u s e a l m o s t any m e a n s at their disposal to f u r t h e r t h e i r g o a l s . T h i s g r o u p can be seen as a disloyal o p p o s i t i o n . ' 3 T h e i d e o l o g i c a l l e a d e r in this g r o u p w a s A m a d o O l m o s until his d e a t h in 1968. D e s p i t e his p a s s i n g a w a y , this faction held together u n d e r the new l e a d e r s h i p of R a i m u n d o O n g a r o , w h o in 1968 forced a split in the C G T . 1 4 O n g a r o w a s elected to head the new C G T de los Argentinos ( C G T of the A r g e n t i n e s ) , an o r g a n i z a t i o n that w a s in c o m p l e t e o p p o s i t i o n to the g o v e r n m e n t . T h e state, it m u s t be e m p h a s i z e d , could d o very little to eliminate this threat directly. Most of the unions and leaders that joined this g r o u p had already lost g o v e r n m e n t recognition and their official positions; in o t h e r w o r d s , these g r o u p s and their leaders were outside of the official political o r g a n i z a t i o n , and, being highly politicized and ideological, they p o s e d a s i g n i f i c a n t threat to a g o v e r n m e n t that wanted to soften societal divisions. T h e only way to m a n i p u l a t e and to control this g r o u p (short of w h o l e s a l e v i o l e n c e or j a i l i n g s , w h i c h w e r e not politically feasible) was indirectly. T h e third union group, the C G T de Azopardo, led by A u g u s t o V a n d o r , w a s the tool that lent itself well to controlling the C G T de los Argentinos. T h e V a n d o r i s t a s are best interpreted as a semiloyal opposition. Prior to the 1966 c o u p , V a n d o r had been the initiator of an aggressive strategy geared t o w a r d s extracting the best possible agreements out of the g o v e r n m e n t (one p h a s e of which w a s the Plan de L u c h a during the Illia regime). T h e basis of this plan was to attack ( g o l p e a r ) and then to negotiate (negociar). This tack w o r k e d very well until the failed strike in February 1967. Reacting to the new f i r m n e s s and determination on the part of the government, V a n d o r then believed that tentative support of the government would be more productive in attaining a d v a n t a g e s f o r his rank and file. T h e g o v e r n m e n t gave n o real a d v a n t a g e s to the u n i o n s that V a n d o r represented, however. While V a n d o r argued for restraint a m o n g his rank and file and often even explained the need to put off c u r r e n t b e n e f i t s so as to p r o m o t e growth and h e n c e a m o r e a d v a n t a g e o u s e c o n o m i c situation in the future, the g o v e r n m e n t treated the C G T de A z o p a r d o little better than the C G T de los Argentinos. All of this meant that the union m o v e m e n t was not being reformed at all

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Alliance

47

as the g o v e r n m e n t w a s u n w i l l i n g either to a t o m i z e or to f o s t e r divisions w i t h i n t h e C G T . T h i s p o t e n t o r g a n i z a t i o n that had w r o u g h t so m a n y d i f f i c u l t i e s on p r e v i o u s g o v e r n m e n t s r e m a i n e d u n a l t e r e d . W h e n it w o u l d strike again, the C G T would still be as p o w e r f u l as it w a s in 1966. T h e only way that the g o v e r n m e n t w a s a t t e m p t i n g to control this threat w a s by e n s u r i n g that w o r k e r s w o u l d not s u f f e r t o o m u c h d u r i n g the e c o n o m i c reorganization. U n e m p l o y m e n t was to remain low, and large w a g e cuts were not acceptable. D u e to the lack of determination in dealing with this threat, the e c o n o m i c s team found significant limitations placed on its p o l i c y m a k i n g capabilities. In the alliance that O n g a n i a w a s brokering, it can be c l a i m e d therefore that labor was only "partially excluded." These factors prevented the c r e a t i o n of a f i r m alliance with the f a v o r e d c o r p o r a t i s t entities; only a "tentative alliance" was feasible. At least the policies regarding the f a v o r e d corporatist entities w e r e far more c o h e r e n t , h o w e v e r . D e s p i t e the limitations placed on the e c o n o m i c s team, the f u n d a m e n t a l e c o n o m i c reasoning was very sound. Krieger V a s e n a a n n o u n c e d on 13 M a r c h 1967 a series of policies geared t o w a r d s p r o m o t i n g lower inflation and higher g r o w t h as well as e n c o u r a g i n g investment. T h e most important aspect of the initial e c o n o m i c plan was a devaluation of the peso by a p p r o x i m a t e l y 4 0 percent, f r o m 255 pesos to the dollar to 350; this w a s p r o m i s e d to be the last devaluation ever. T h e devaluation was "fiscally c o m p e n s a t e d , " a t e c h n i c a l term that r e f e r s to f i n a n c i a l r e g u l a t i o n s and a d j u s t m e n t s geared towards eliminating windfall profits and losses due to the devaluation. T h e m a j o r a d j u s t m e n t s were a one-time tax on foreign currency holdings and bank accounts, a reduction on import tariffs, and an increase of 16 p e r c e n t to 25 p e r c e n t on the e x p o r t d u t i e s l e v i e d on t r a d i t i o n a l (agricultural) products. T h e reduction in import and increase in export taxes had the d o u b l e a d v a n t a g e of reducing windfall profits and losses while also limiting the inflationary pressure caused by the devaluation. 1 5 This w a s the first time in the history of A r g e n t i n a ' s f r e q u e n t and substantial d e v a l u a t i o n s that the g o v e r n m e n t also t o o k steps to c o m p e n s a t e m a n y of the implicit redistributive effects. Krieger Vasena also a n n o u n c e d significant increases in the costs of public services, 1 6 and several t e m p o r a r y taxes geared t o w a r d redressing the b u d g e t deficit. For e x a m p l e , a o n e - t i m e 1 percent tax on real estate was declared. A series of policies a n n o u n c e d shortly a f t e r 13 M a r c h w e r e a i m e d at f o s t e r i n g g r o w t h , investment, and industrial d e e p e n i n g . Several tax credits were a n n o u n c e d , geared toward p r o m o t i n g investment and the p u r c h a s e of industrial and agricultural machinery. C o r p o r a t e tax liabilities were reduced, a n d c o n s t r u c t i o n w a s e n c o u r a g e d t h r o u g h tax s u b s i d i e s f o r h o u s i n g investments. A law that required landowners to renew leases to tenant f a r m e r s was repealed in an attempt to foster higher agricultural output. M a n y c h a n g e s w e r e m a d e to attract f o r e i g n capital and a s s u r e the international b u s i n e s s c o m m u n i t y of the s e r i o u s n e s s of the e c o n o m i c s t e a m ; the most i m p o r t a n t

48

Resolving

the Argentine

Paradox

w a s t h e c o m p l e t e l i b e r a l i z a t i o n o f c u r r e n c y m a r k e t s . F i g u r e 2.1 s h o w s that t h e s e a c t i o n s d i d n o t r e s u l t in s i g n i f i c a n t

i n c r e a s e s in i n v e s t m e n t in t h e

i m m e d i a t e term, thus reflecting the d e f e n s i v e outlook o f the

corporatist

entities.

Figure 2.1

Total i n v e s t m e n t , 1964-1969

22.000 21,000 • 20,000 '

Q

19,000 18,000 -

c c =

17.000 16,000 li,000

-

14,000 13.000 '

1964

1965

1966

1967

1968

1969

Sonn i': Based on data from a privale study by Orlando Fcrrcres. 1992,

Pivotal among

Krieger Vasena's

policies were those geared

toward

a r r e s t i n g t h e i n f l a t i o n a r y s p i r a l . W a g e s w e r e i n c r e a s e d b y 15 p e r c e n t a c r o s s t h e b o a r d but at t h e s a m e t i m e w e r e f r o z e n f o r t h e n e x t t w e n t y - o n e m o n t h s . Collective bargaining was also indefinitely suspended. This combination

of

p o l i c i e s , K r i e g e r V a s e n a had hoped, would adjust w a g e s for past r e a l - w a g e d e p r e c i a t i o n a n d h e n c e n o t c a u s e e x c e s s i v e a n t a g o n i s m on t h e p a r t o f t h e workers while putting long-term and continuous downward pressure

on

i n f l a t i o n . A s i n f l a t i o n c o n t i n u e d , real w a g e s w o u l d d e c l i n e , t h u s l o w e r i n g t o t a l real d e m a n d . T h i s g r a d u a l d e c r e a s e in w a g e s i m p l i e d that m a n y o f t h e c o s t s l e v i e d on t h e w o r k i n g c l a s s e s w e r e i m p l i c i t l y d e l a y e d until a l a t e r d a t e as inflation eroded their buying power. T h e o t h e r m a j o r c o m p o n e n t o f the fight against inflation w a s the c r e a t i o n o f a " v o l u n t a r y " p r i c e - f r e e z e a g r e e m e n t w i t h t h e p r i v a t e s e c t o r ; it w a s

Ongania and the Industrial

Alliance

49

a n n o u n c e d 15 M a y 1967. In essence, the m a j o r industrial c o m p a n i e s were invited to agree to a six-month price freeze. O n c e a c o m p a n y joined, it should be e m p h a s i z e d , it w a s n o longer v o l u n t a r y — t h e c o m p a n y w a s obliged to r e m a i n in the structure f o r the full six m o n t h s . C o m p a n i e s that j o i n e d this a n t i - i n f l a t i o n a r y m e c h a n i s m w e r e p r o m i s e d several a d v a n t a g e s . First, g o v e r n m e n t p r o c u r e m e n t c o n t r a c t s w o u l d b e m a d e only with t h e s e c o m p a n i e s . In addition, Krieger V a s e n a also authorized subsidized credit (at n e g a t i v e real interest rates) to most A r g e n t i n e h o u s e h o l d s f o r c o n s u m e r g o o d s . H o w e v e r , this credit could only be used to buy p r o d u c t s f r o m the c o m p a n i e s in the p r i c e - f r e e z e m e c h a n i s m . T h e b u s i n e s s c o m m u n i t y ' s r e s p o n s e w a s e n t h u s i a s t i c — 8 4 c o m p a n i e s j o i n e d the m e c h a n i s m within a w e e k (by 22 M a y ) and another 195 joined shortly thereafter. By N o v e m b e r , 1,961 c o m p a n i e s had j o i n e d . 1 7 T h e y assumed that this a g r e e m e n t would be r e n e w e d at t h e e n d of the s i x - m o n t h p e r i o d . M o s t i m p o r t a n t , the g o v e r n m e n t ' s policy did nothing to control price increases on the part of wholesalers or retailers; this lack of control explains why the c o n s u m e r price index outpaced inflation (the latter a m a l g a m a t i n g wholesale and retail prices to a p r o d u c t ' s factory costs), a fact important to keep in mind when looking at the future phases of the e c o n o m i c plan. Eventual price a d j u s t m e n t s would be granted only for increases in costs due to imported inputs that were above 3 percent, an a m o u n t that the g o v e r n m e n t thought the private c o m m u n i t y could a b s o r b by itself. In 1968 the e c o n o m i c s team decided that the g o v e r n m e n t itself would h a v e to take an a c t i v e part in the e c o n o m i c restructuring as i n v e s t m e n t r e m a i n e d stagnant. T h e plan had two aspects. First, the g o v e r n m e n t wanted to increase its share of direct investment in the e c o n o m y , particularly in the i n f r a s t r u c t u r e . S e c o n d , the e c o n o m i c s team hoped and t h o u g h t that these e x p a n s i o n a r y policies w o u l d foster more private investment. It was hoped that the e x p a n s i o n a r y policy would push d e m a n d beyond i n d u s t r y ' s capacity to p r o d u c e . In other w o r d s , the e c o n o m i c s t e a m tried to e n s u r e that the significant excess capacity present in the e c o n o m y could be quickly brought on line so as to c r e a t e a situation in which large-scale i n v e s t m e n t s were necessary to k e e p pace with growing d e m a n d . Clearly, the e c o n o m i c policy relied almost solely on inducements, as contrasted with constraints, to foster investment a m o n g the favored corporatist entities. In order to f u n d this project, the government increased real receipts by 15 p e r c e n t and f u r t h e r a u g m e n t e d its f i n a n c i a l resources by attracting m o r e international capital and by appropriating the surplus of the National Social B e n e f i t s O r g a n i z a t i o n ( m u c h as the U.S. g o v e r n m e n t d o e s with Social Security). T h e s e resources were used to increase g o v e r n m e n t expenditure on public investment by 3 0 percent, as can be seen in Table 2.1, to provide the m a i n s t i m u l u s to the e c o n o m y . In c o n j u n c t i o n with this, the real m o n e y s u p p l y w a s s i g n i f i c a n t l y increased with the e x p r e s s a i m of r e d u c i n g the interest rate as a f u r t h e r stimulus to investment. 1 8

50

Resolving

Table 2.1

the Argentine

Paradox

The 1967 and 1968 Budgets as Prepared by Krieger Vasena (in billions of pesos) 1967 ( a c t u a l )

Current Expenditures Operations Transfers Capital Expenditures Other Expenditures Savings from Increased Efficiency Total Revenues Taxes Other Revenues I n f l o w s of C a p i t a l National International Other Revenues Deficit

427.9 273.5 154.4 156.1 18.0 0 602.0 476.2 419.0 57.2 12.9 7.9 5.0 13.7 99.2

1968 ( b u d g e t pla 489.4 300.0 189.4 217.0 0 (18.0) 688.4 574.9 514.2 60.7 65.0 30.0 35.0 0 48.5

Source: J u a n C a r l o s d e P a b l o , La politica antiinflactonariti en la Argentina, A m o r r o r t u . B u e n o s A i r e s , 1970. m y t r a n s l a t i o n . R e p r i n t e d with p e r m i s s i o n .

1967-1990.

A 2 0 p e r c e n t tax on t h e i m p o r t a t i o n of c e r t a i n capital g o o d s w a s a l s o i m p l e m e n t e d with an e y e t o w a r d p r o m o t i n g d e v e l o p m e n t and p r o d u c t i o n of b a c k w a r d - l i n k e d e c o n o m i c i n p u t s . 1 9 At t h e s a m e t i m e , e x p o r t t a x e s on agricultural g o o d s w e r e gradually reduced in order to guarantee the agricultural sector c o n s t a n t real returns. I m p l i c i t in t h e e c o n o m i c p r o g r a m w a s an a l l i a n c e b e t w e e n the n a t i o n a l a n d i n t e r n a t i o n a l b o u r g e o i s i e s . All of t h e p o l i c i e s i m p l e m e n t e d w e r e b e n e f i c i a l to t h e s e g r o u p s : f r o m the i n v e s t m e n t credits, to the e x p a n s i o n of t h e m a r k e t t h r o u g h c o n s u m e r credit, to p a r t i c u l a r tax c h a n g e s . T h e c e n t r a l a s p e c t of t h e e c o n o m i c c h a n g e s e f f e c t e d w a s t h e d e v a l u a t i o n , t h e c o m p e n s a t o r y a s p e c t s of w h i c h w e r e b e n e f i c i a l to t h e industrial sectors at t h e c o s t of the agricultural o n e s ; the fact that n e v e r b e f o r e had a d e v a l u a t i o n b e e n c o m p e n s a t e d s u g g e s t s that this r e s u l t w a s e x p r e s s l y d e s i r e d . F u r t h e r , an a l l i a n c e b e t w e e n the industrial sectors m a d e theoretical s e n s e — t h e industrial sectors w e r e central to p r o m o t i n g b a c k w a r d linkages, e x p a n d i n g the p r o d u c t i o n of capital g o o d s , and r e d u c i n g t e c h n o l o g i c a l d e p e n d e n c e on t h e first w o r l d . It s h o u l d b e r e m e m b e r e d that K r i e g e r V a s e n a — a n d O n g a n i a — w e r e a l m o s t c e r t a i n l y u n d e r p r e s s u r e to o b t a i n q u i c k r e s u l t s . G i v e n t h e u n d e r u t i l i z a t i o n of installed industrial c a p a c i t y , K r i e g e r V a s e n a c o u l d f o s t e r an i m m e d i a t e b o o m p e r i o d w i t h this i n d u s t r i a l c o a l i t i o n , as e v i d e n c e d in F i g u r e 2.2, w i t h o u t l i m i t i n g his c a p a c i t y to f i g h t i n f l a t i o n . O n c e a g a i n , it is c l e a r that t h e g o v e r n m e n t h a d a great deal of r e l a t i v e f r e e d o m . A g r i c u l t u r e w a s largely e x c l u d e d f r o m the alliance, yet t h e S R A did not yet o p p o s e the government. "Although Krieger V a s e n a ' s e c o n o m i c p o l i c y w a s c l e a r l y a n t i - a g r i c u l t u r e , w e [the S R A ] initially a c c e p t e d t h e

Ongania Figure 2.2

and the Industrial

Alliance

51

Annual Growth Rate of GDP, 1966-1970

Source: B a s e d o n d a t a f r o m W i l l i a m C . S m i t h , Authoritarianism and Argentine Political Economy. S t a n f o r d U n i v e r s i t y Press, S t a n f o r d , 1989.

the Crisis

of

the

e c o n o m i c costs i m p o s e d on us in the h o p e of s o m e sort of long-term benefits, namely growth and stability. The fact that the policy seemed to us rational and well thought out encouraged us to give the policy some time to w o r k . " 2 0 It is essential to e m p h a s i z e that the S R A was only partially excluded, however; efforts were made to encourage agribusiness investment through credits, and export duties were gradually reduced in order to offset the effects of the continuing (though declining) inflation. T h e results of this first phase of Krieger V a s e n a ' s e c o n o m i c program were favorable. Inflation significantly decreased and G N P grew briskly. With the return of stability combined with the calls for rational economic policy, the e c o n o m y b o o m e d as unused capacity began to be used. The m a j o r disapp o i n t m e n t was the lack of private investment, which limited the extent to which the economy was being fundamentally modernized. The following was said regarding international capital: "[E]ven with a prestigious economic czar like Krieger Vasena serving as guarantor, international capital had to believe

52

Resolving

the Argentine

Paradox

f i r m l y in the f u t u r e stability of their local allies before investing, and yet inv e s t m e n t w a s n e e d e d b e f o r e f u t u r e e c o n o m i c expansion could c o n f i r m the w i s d o m of their trust." 2 1 As far as A r g e n t i n e capital was concerned, Juan Carlos de Pablo claimed that "the private sector's actions were very conservative and implied a depression-like outlook" despite the brisk e c o n o m y . 2 2 The o b v i o u s implication of this w a s that the corporatist entities continued to rely on redistribution of wealth instead of the creation of wealth for higher profits.

Intensification of the Program and Growing Resistance All indicators w e r e positive at the beginning of 1969, after more than two y e a r s of the e c o n o m i c p o l i c y : I n f l a t i o n w a s d o w n , g r o w t h up, and the currency remained stable. Given these achievements, Krieger Vasena entered 1969 with t w o a d v a n t a g e s . First, he could be assured a certain a m o u n t of support just because of these f a v o r a b l e conditions. N o corporatist entity nor c o m p e t i n g p o w e r broker could claim that the e c o n o m y was doing badly or that the policy was unsound. T h e two power brokers in opposition could not, u n d e r these c i r c u m s t a n c e s , rally support in an attempt to return to power, a fact that g r e a t l y a u g m e n t e d stability and policy f r e e d o m . T h e s e c o n d a d v a n t a g e was that industrial capacity was nearly fully utilized. No longer, in other words, could business put off investment by merely increasing output of existing capital; in order to keep up with demand, new productive capacity w o u l d have to be built. This w a s a central advantage in promoting the allimportant d e e p e n i n g of industrialization and restructuring of the e c o n o m y ; without such advances, the state of Argentine d e v e l o p m e n t would not have p r o g r e s s e d , which would merely result in the return of the b o o m - a n d - b u s t cycle. T h e s e advantages could easily b e c o m e liabilities, however. The excellent e c o n o m i c indicators b e c a m e baselines: N o one could criticize the e c o n o m i c policy so long as they c o n t i n u e d , but the deterioration of any one of t h e m w o u l d o p e n a P a n d o r a ' s b o x . C o r p o r a t i s t entities would c o m p l a i n and s o m e — t h o s e that were excluded f r o m the alliance—could be counted on once again to actively o p p o s e the policy. Internal dissension within the military w o u l d also be f o r e d o o m e d . T h e f l a m e s would be fanned by the other p o w e r b r o k e r s l o o k i n g for a n e w opportunity to return to power. Krieger V a s e n a b e c a m e , in s u m , a slave to c o n t i n u e d and unrelenting success, the lack of w h i c h w o u l d lead to u n c e r t a i n t y , lack of legitimacy, and b r e a k d o w n of c o n s e n s u s regarding the c o u r s e of e c o n o m i c policy. All this occurred just as the easy b o o m phase of the e c o n o m i c policy was rapidly coming to an end. A s if t h e s e t e n s i o n s w e r e not e n o u g h , m a n y of the " c o s t s " of the e c o n o m i c p o l i c y b e g a n s t r a i n i n g a g a i n s t the s u p p o s e d t r a n q u i l l i t y . Inflationary pressure returned after t w o years of expansion of d e m a n d and

Otiganía

and

the Industrial

Alliance

53

i n c r e a s e s in t h e m o n e y s u p p l y . A t y p i c a l e c o n o m i c c y c l e s u g g e s t e d t h a t a r e c e s s i o n w a s in t h e m a k i n g , p a r t i c u l a r l y g i v e n t h e f a c t t h a t i n v e s t m e n t h a d thus far remained low.23 T h e continuing, albeit diminished, inflation rate i n c r e a s e d t h e r e a l v a l u e o f t h e c u r r e n c y ; a l t h o u g h in 1 9 6 7 t h e e x c h a n g e r a t e w a s highly c o n d u c i v e to e x p o r t i n g and the currency w a s

fundamentally

u n d e r v a l u e d , b y t h e b e g i n n i n g of 1 9 6 9 t h e s i t u a t i o n w a s t h e o p p o s i t e . It is i m p o r t a n t t o e m p h a s i z e t h a t m o s t o f t h e a d v a n t a g e s g a i n e d b y t h e industrial corporatist entities c a m e by m e a n s of a redistribution, implicit or e x p l i c i t , f r o m o t h e r c o r p o r a t i s t e n t i t i e s . I n d u s t r i a l i s t s w e r e c l e a r l y in a b e t t e r p o s i t i o n a f t e r t w o y e a r s o f K r i e g e r V a s e n a ' s p o l i c i e s , b u t t h i s w a s in n o w a y d u e t o t h e i r o w n m e r i t — t h e y h a d n e i t h e r i n v e s t e d n o r i m p r o v e d e f f i c i e n c y in a n y w a y that m i g h t j u s t i f y their increased profit m a r g i n s . O b v i o u s l y , the other groups were g r o w i n g increasingly disheartened with subsidizing the i n d u s t r i a l i s t s . W a g e s c o n t i n u e d t o f a l l in r e a l t e r m s ( a s c a n b e s e e n in F i g u r e 2.3), and agriculture s u f f e r e d f r o m the fixed e x c h a n g e rate (by 1969, almost all e x p o r t t a x e s h a d a l r e a d y b e e n r e m o v e d s o t h a t c o m p e n s a t i o n f o r i n f l a t i o n w a s no longer possible). All of this w a s m o r e difficult to tolerate b e c a u s e the e c o n o m y w a s g r o w i n g r o b u s t l y . In s h o r t , t h e g o o d w i l l t a p p e d f o r t h e s h o r t t e r m sacrifices w a s w e a r i n g thin.

Figure 2.3

Industrial W a g e s , 1 9 6 6 - 1 9 6 9

102 -q

1966

•

1967

1968

1969

Avg. Indust. Annual Wage: I N D E C (Instituto Nacional de Estadística y Censos)

Avg. Indust. Wage: BCRA (Banco Central de la República Argentina)

Avg. Indust. Hourly Wages: INDEC

Legal Minimum Annual Indust. Wage

Source: Based on data f r o m Guillermo O ' D o n n e l l , Institute of International Studies, Berkeley, 1979.

Bureaucratic-Authoritarianism,

54

Resolving

the Argentine

Paradox

K r i e g e r V a s e n a ' s r a n g e of potential policies that c o u l d be used to c o n f r o n t these p r o b l e m s w a s also b e c o m i n g limited. A s the e c o n o m y had little to no excess capacity, the trade-off between inflation and growth grew palpable. M o r e o v e r , by 1969, he had less ability to use i n d u c e m e n t s rather than constraints to p r o m o t e certain e c o n o m i c results. T h e state, for example, could not further increase s p e n d i n g and investment as this would m a k e the state too central an e c o n o m i c actor f o r the e c o n o m i c p r o g r a m still to be considered "liberal" and "market oriented." A f u r t h e r p r o b l e m related to the i m p l e m e n t a t i o n of structural c h a n g e s that w e r e essential to c o m p l e t i n g the liberal p r o g r a m . S u c h a p r o g r a m i n c l u d e d a d j u s t i n g relative prices a f t e r such a long price f r e e z e and the o p e n i n g of the e c o n o m y to foreign c o m p e t i t i o n . T h e f u n d a m e n t a l l y liberal e c o n o m i c s t e a m was e a g e r to e f f e c t this stage of the e c o n o m i c p r o g r a m . M o r e o v e r , both the U I A and the S R A w e r e s t r o n g l y in f a v o r of such changes. Not moving ahead with the more fundamental c h a n g e s envisioned in the e c o n o m i c plan would c a u s e discord within the e c o n o m i c s team as well as with the liberal corporatist entities. T h e catch was that i m p l e m e n t i n g these changes would also a u g m e n t the e x i s t i n g tension. S u c h structural c h a n g e s were a n a t h e m a to the C G E . Inc r e a s e d f o r e i g n c o m p e t i t i o n w o u l d inevitably r e d u c e the national b o u r g e o i s i e ' s profit m a r g i n s . Particular c o m p a n i e s and even industries feared bankruptcies. N e w investment to hone efficiency would be necessary, but the returns on these investments could not be assured as bankruptcy, despite any level of investment, was always possible. Of course, the C G T was also very m u c h o p p o s e d to any o p e n i n g of the market. It is important to realize that the structural c h a n g e s caused a schism a m o n g the favored corporatist entities. M o r e o v e r , it was impossible f o r Krieger V a s e n a to broker a new alliance between the "liberal" S R A and U I A after the f o r m e r had been asked to sacrifice so m u c h . T h e necessary orientation of policy and mutual trust simply did not exist. Krieger V a s e n a ' s only alternative was to rely increasingly on the international bourgeoisie. As m i g h t be e x p e c t e d u n d e r t h e s e c o n d i t i o n s , K r i e g e r V a s e n a w a s d e t e r m i n e d to take a d v a n t a g e of the full capacity of the e c o n o m y in order to f o r c e investment while holding all the other parts of the plan together; the e c o n o m i c policy b e c a m e q u i t e c o n s c i o u s l y a race against time. K r i e g e r V a s e n a needed to m a k e sure that f u n d a m e n t a l restructuring would begin in 1969. E v e r y t h i n g w o u l d be d o n e to f o r c e the i n d u s t r i a l s e c t o r s , and particularly the U I A , to invest as quickly as possible in the h o p e that the p r o g r a m could be held together f o r one more year. A f t e r that, if the policies w e r e s u c c e s s f u l , a general d e c o m p r e s s i o n of the tensions could o c c u r as a natural result of growth and new wealth. An e n h a n c e d price f r e e z e w a s decided upon as the best m e c h a n i s m to s u p p r e s s the g r o w i n g tensions while e n c o u r a g i n g g r o w t h and i n v e s t m e n t . T h e prices of industrial g o o d s were allowed to increase, on average, only a

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small percentage, one well below the increases in labor costs. In an attempt to correct partially relative prices, however, Krieger V a s e n a decided that the industrial g r o u p s t h e m s e l v e s could a l l o c a t e the price increases. In o t h e r words, the weighted average of all industrial prices could only increase by the a m o u n t d e t e r m i n e d by the e c o n o m i c s t e a m . W h i c h p r o d u c t s within that basket of g o o d s could obtain price increases and by h o w m u c h were to be d e t e r m i n e d by the industrialists t h e m s e l v e s . In order to control c o n s u m e r inflation as well as p r o d u c e r ' s prices, the e c o n o m i c s team decided to include wholesalers and retailers within the price control s c h e m e . 2 4 H a v i n g already t a p p e d all the i n d u c e m e n t s a v a i l a b l e to t h e m , t h e p o l i c y m a k e r s n o w introduced new c o n s t r a i n t s in their attempt to spur investment. First, more segments of the e c o n o m y were included in the price controls (wholesalers and r e t a i l e r s ) . M o r e i m p o r t a n t , industrialists w e r e e n c o u r a g e d to invest to counteract the higher labor costs that inevitably reduced profit margins; this can be seen as an implicit constraint of the bourgeoisie. I n v e s t m e n t s were s u p p o s e d to counteract decreasing profit margins, c o m p a r e d to just m o n t h s b e f o r e w h e n b u s i n e s s w a s supposed to invest so as to profit f r o m recently fattened margins. Inducements that had already been introduced were kept in place and even reinforced where possible. G o v e r n m e n t expenditures remained u n c h a n g e d at their recently i n c r e a s e d level to g u a r a n t e e c o n t i n u e d strong d e m a n d . In c o n j u n c t i o n with this fiscal policy, the monetary base w a s allowed to e x p a n d rapidly; the hope w a s to reduce real interest rates to spur investment. T h e inflationary pressures w o u l d inevitably mount, given this mixture of fiscal and monetary policy, but, it was hoped, could be controlled through the price freeze. T h e e c o n o m i c s t e a m also decided that it w a s essential to i m p r o v e the lackluster agricultural sector. In view of the fact that the g o v e r n m e n t did not have the resources needed to o f f e r inducements (a devaluation, for e x a m p l e , was impossible given the inflationary pressures), Krieger V a s e n a opted f o r a constraint: a new tax ostensibly based on land values. In reality, this tax w a s to be b a s e d on the p r o d u c t i v e capacity (regardless of p r e v i o u s or current output) of agricultural land as a way to force the agricultural bourgeoisie to i m p r o v e o u t p u t and e f f i c i e n c y . 2 5 T h i s proposal clearly represented a n e w c o n s t r a i n t on the S R A . C o n s e q u e n t l y , the S R A w a s m o r e inclined, if not eager, to j u m p ship u p o n the first sign of bad n e w s and actively resist the e c o n o m i c policy so as to avoid incurring this new tax. Indeed, the S R A w a s o f f e r e d just such an excuse; the land tax w a s never to be implemented. It is clear that the c o m p l e t e l y e x c l u d e d C G T represented the greatest threat to the e c o n o m i c policy; this corporatist entity was ready to e x p l o d e at t h e least of p r o v o c a t i o n s , an o c c u r r e n c e that w o u l d j e o p a r d i z e the w h o l e e c o n o m i c restructuring. W i t h this in mind, Krieger V a s e n a a n n o u n c e d an 8 p e r c e n t a c r o s s - t h e - b o a r d w a g e increase. D e s p i t e this, w a g e s c o n t i n u e d to decline in real terms. T h e deterioration of living standards w a s all the m o r e

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p a i n f u l to accept as O n g a n i a ' s rhetoric stressed the i m p o r t a n c e of social j u s t i c e and alluded to the b e g i n n i n g of a second or "social p h a s e " of the A r g e n t i n e revolution. Further, the w a g e increases were, once again, denying both the V a n d o r i s t s and the collaborationists any a d v a n t a g e s over the more militant unions. U n d e r these c i r c u m s t a n c e s , all g r o u p s were discontented with the labor policy: Industrialists and liberals were unhappy that the unions w e r e not b e i n g a t o m i z e d , and the C G T and e c o n o m i c nationalists were d i s t r a u g h t that w o r k e r s were still being forced to s u f f e r the brunt of the e c o n o m i c policy. T h e middle road that was being f o l l o w e d w a s rendered t r e a c h e r o u s with the a b s e n c e of any manipulation of the unions through offering concrete advantages to Vandor. T h e r e g i m e ' s inability to d o m e s t i c a t e labor also fueled r e n e w e d p r e s s u r e s f r o m big b u s i n e s s to d i s m a n t l e the C G T . T h i s f u r t h e r e d the n a t i o n a l i s t s ' d e s p e r a t i o n to m a r s h a l their d w i n d l i n g l a b o r s u p p o r t in o r d e r to resist the m o u n t i n g a t t a c k s of civilian and military liberals. All c a m e to n a u g h t , h o w e v e r , b e c a u s e O n g a n i a c o u l d not b r i n g h i m s e l f to g r a n t his w o u l d - b e c o l a b o r a c i o n i s t a allies real political p o w e r . 2 6

T h e final break that forced the Vandoristas into the opposition c a m p occurred in m i d - 1 9 6 8 . It was in August of that year that [ s | h o r t l y a f t e r c o n s t i t u t i n g its a u t h o r i t i e s , the C G T - A z o p a r d o r e q u e s t e d an a u d i e n c e w i t h O n g a n i a . V a n d o r i s m s a w in t h e g o v e r n m e n t ' s f r a g m e n t a t i o n a c h a n c e to b e g i n n e g o t i a t i o n s a i m e d at s a v i n g the u n i o n s , w i t h t h e i r b u r e a u c r a t i c and i d e o l o g i c a l l i m i t a t i o n s , f r o m t h e q u i t e r a d i c a l path m a r k e d out by the C G T de los A r g e n t i n o s . O n g a n i a , s h o w i n g as a l w a y s a d m i r a b l e e v e n h a n d e d n e s s but p o o r p o l i t i c a l j u d g e m e n t , r e j e c t e d this r e q u e s t in a p u b l i c s t a t e m e n t d e c l a r i n g that the a u t h o r i t i e s of the C G T - A z o p a r d o " h a v e not yet b e e n properly r e c o g n i z e d [as a u t h e n t i c a l l y r e p r e s e n t a t i v e ] by the L a b o r S e c r e t a r i a t . " T h e C G T A z o p a r d o r e s p o n d e d by p r o t e s t i n g that the g o v e r n m e n t had no d e s i r e f o r a " d i a l o g u e with the w o r k e r s . " But d e s p i t e O n g a n i a ' s r e f u s a l to talk with t h e V a n d o r i s t s , he held s e c r e t m e e t i n g s with p a r t i c i p a t i o n i s t l e a d e r s . N e w s of t h e s e m e e t i n g s , w h e n l e a k e d to t h e p r e s s , p r o v o k e d t h e u n a n i m o u s d i s g u s t of t h e l i b e r a l s , u p p e r b o u r g e o i s i e , a n d t h e Vandorists.27

V a n d o r w a s o f f e r e d no a d v a n t a g e s o v e r O n g a r o of the C G T de los A r g e n t i n o s w h i l e the openly collaborationist u n i o n s were at least o f f e r e d c o n t a c t s with the g o v e r n m e n t . U n d e r these c i r c u m s t a n c e s , V a n d o r had n o c h o i c e but to j o i n the likes of O n g a r o in a c t i v e o p p o s i t i o n to the g o v e r n m e n t ; if V a n d o r did not take such steps, he would have risked losing the support of his increasingly restless rank and file to O n g a r o , support on w h i c h his p o w e r and position were contingent. T h e enmity of the C G T w a s r e n d e r e d all t h e m o r e d a n g e r o u s as the o t h e r c o r p o r a t i s t entities g r e w disenchanted with Ongania and Krieger Vasena. T h e S R A wanted to avoid the

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n e w tax. T h e C G E w a s f e a r f u l of the structural c h a n g e s that w e r e to b e e n f o r c e d . C o n t a c t s b e t w e e n the C G E a n d the C G T increased their c o n t a c t s w i t h the a i m of b l o c k i n g the o p e n i n g of the e c o n o m y a n d of reverting to m o r e populist-oriented policies. T h e s e contacts were particularly d a n g e r o u s as they furthered the schism within the chosen alliance between the U I A and the C G E . T h e s e contacts also offered a viable political alternative that had thus far been lacking. T h e r e is c u r r e n t l y w i d e s p r e a d e v i d e n c e t h a t t h e r a d i c a l u n i o n s h a d , b y 1969, long been p r e p a r i n g an a f f r o n t to the g o v e r n m e n t . T h e m o m e n t f o r s u c h a n a c t i o n c a m e w i t h t h e S o u t h e r n H e m i s p h e r e ' s w i n t e r . In M a y , s e v e r a l s o c i a l b e n e f i t s w e r e a c c i d e n t a l l y a n n u l l e d f o r a l a r g e s e c t o r o f t h e w o r k e r s in A r g e n t i n a ' s second largest and highly industrialized city, C o r d o b a . At the s a m e t i m e , t h e t r e n d t o w a r d l o w e r u n e m p l o y m e n t in t h a t p a r t i c u l a r c i t y w a s r e v e r s e d ( a s s h o w n in F i g u r e 2 . 4 ) d u e t o u n c o n t r o l l a b l e e c o n o m i c f a c t o r s . T h e s e w e r e t h e s p a r k s t h a t lit t h e t i n d e r .

Figure 2.4

Unemployment Rate in Argentina, Cordoba, and Buenos Aires, 1966-1969

Source: Based on data from Juan Carlos de Pablo and Alfonso José Martinez, Argentina: Thirty Years of Economic Policy (1958-87), unpublished ms„ 1988.

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On 2 9 M a y 1969, a m a s s uprising erupted in C o r d o b a , the so-called C o r d o b a z o . T h e uprising was led by students and union workers, two groups that were closely associated as " m a n y day students worked nightshifts at the factories, and many y o u n g car workers were night students; these two groups s e r v e d as a c o n d u i t b e t w e e n a f f a i r s in the u n i v e r s i t y and those in the f a c t o r i e s . " 2 8 T h e protest had broad-based support. A l m o s t e v e r y o n e in the city avoided work and j o i n e d in the protest marches. M a n y , moreover, built barricades, c o n f r o n t e d the police with Molotov cocktails and, less frequently, even with sniper attacks. T h e city was beyond any control. T h e police could d o n o t h i n g but retreat and wait f o r the military to lay siege. A f t e r about a week, political order w a s , for the most part, restored. O n g a n i a ' s government would never recover.

Ongania's Social Program J u a n Carlos O n g a n i a w a s a devout Catholic d e t e r m i n e d to instill a correct moral code to counteract what he interpreted as the moral degeneration typical of the 1960s. T h i s m i s s i o n w a s c l e a r f r o m the very b e g i n n i n g of his g o v e r n m e n t w h e n he selected his m i n i s t e r s . 2 9 T h e president explicitly avoided a n y o n e w h o w a s divorced or w h o subscribed to any religious faith apart f r o m Catholicism. Individuals known f o r their piety and sobriety were clearly p r e f e r r e d — s e v e r a l ministers, f o r e x a m p l e , were teetotalers. M o s t revealing, h o w e v e r , w a s his selection in 1966 of Jorge Salimei as his first minister of e c o n o m i c s . Salimei, a small-time but s u c c e s s f u l b u s i n e s s m a n , had befriended the new president during a religious retreat commonly attended by the m o s t d e v o u t . S a l i m e i had had n o g o v e r n m e n t e x p e r i e n c e and no a d v a n c e d studies in e c o n o m i c policymaking; apart f r o m his u p s t a n d i n g — i n O n g a n i a ' s v i e w — c h a r a c t e r , Salimei had little to r e c o m m e n d him f o r this central g o v e r n m e n t post. O n g a n i a ' s first policies seemed to portray a greater e m p h a s i s on social policy than on e c o n o m i c transformation. While e c o n o m i c policy floundered u n d e r S a l i m e i , as d e s c r i b e d above, O n g a n i a resolutely attacked the social decay he saw around him. T h e g o v e r n m e n t intervened in the universities in a m a n n e r h e r e t o f o r e unparalleled in A r g e n t i n e history. Student u n i o n s w e r e taken over, and Peronist and "morally lax" scholars were threatened and often expelled. P r o f e s s o r s w e r e also e x p o s e d to similar scrutiny. Needless to say, curricula were altered to stress morality, the valor of the armed services, and d e g e n e r a c y as aspects of the Peronist m o v e m e n t . Given such f o r c e f u l and c o m p r e h e n s i v e intervention, both students and professors could hardly resist. On a m o r e general level, O n g a n i a attempted to depoliticize A r g e n t i n e society. T h e president had a very strong paternalistic instinct; his g o v e r n m e n t w a s to foster the general good (as interpreted, needless to say, by Ongania and his c l o s e s t c o h o r t s ) , and t h e p o p u l a t i o n w a s to a c c e p t o b e d i e n t l y t h e

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directions from above. Political debate was quashed: Policies were announced without any social consultation (as compared to consultation with the corporatist entities such as Opus Dei), political parties ceased to exist in everything but name, and censorship grew rampant. Similarly, the church became a far more prominent organization with the express goal of curing the moral ills. Initially, it seemed as though these policies were successful. No student radicalism was apparent; society seemed accepting of its new role as a passive benefactor of a paternalistic government; and, as far as can be judged, " i m m o r a l " behavior—premarital sex and alcohol consumption serve as examples—grew less visible if not less common. With the Cordobazo returned the explicitly political nature of Argentine society. Student radicalism and heterogeneity returned with a vengeance. As far as can be judged, experimentation typical of the first world in the 1960s became more common. The social aspect of la Revolución Argentina, in conjunction with the subsequent uprising against it, fundamentally marked the political climate. The country's social tensions were no longer implicit—those with differing points of view now began to actively battle each other in the public arena. Argentine society, long contentious but implicitly and peacefully so, now crossed the fine line that would allow the debates to take on new and palpable importance; turning back would be impossible. It was with the Cordobazo that a Pandora's box was opened that unleashed a cycle of unprecedented violence in Argentina. Guerrilla activity, for the most part, emerged after, not before, the Cordobazo. Except in Córdoba itself, the events of May 1969 were less the culmination of an ongoing process than the starting point for new forms of protest and armed struggle that were much more active and violent than those practiced before 1966. This protest and violence would soon become part of the peculiar normality of Argentine politics.30

The veritable explosion in violence is well illustrated in Figure 2.5. The free-for-all war was to destroy any chances of reestablishing stability and legitimacy during the Argentine revolution; this might not have been immediately obvious, however. As will be seen, Krieger Vasena's successors attempted to hold together the fragile economic plan; they were doomed to fail, however. More important still, this internal war would risk not only an e c o n o m i c plan but the very existence and stability of Argentine society. Ongania's successors would all struggle to hold the latter together. They did so in a manner that was always geared toward favoring one ideology, one political group, one interpretation of history over the others. Each of the following governments here studied attempted yet another stabilization plan with an associated social ideology. Stability could

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Figure 2.5

the Argentine

Paradox

Number of Terrorist Actions, 1966-1972

< c oj X>

E a

Z

1966

1967

1968

Bombings

j

m

Source:

j

Assassination attempts

1969

1970

1971

1972

"Armed propaganda"

Other acts

Kidnappings

Based on data from W. Smith 1989.

be f o u n d t e m p o r a r i l y , b u t the p r o c e s s of c o r p o r a t i s t b r e a k d o w n had n o w b e g u n . T h e s e a t t e m p t s too, it is n o w clear, were d o o m e d to failure. Instead of o f f e r i n g the p r o m i s e d peace and social harmony, these policies and the r e a c t i o n s a g a i n s t t h e m p r e c i p i t a t e d a civil w a r that w o u l d cost t h o u s a n d s of lives a n d w o u l d , at a certain point, threaten a L e b a n o n i z a t i o n of t h e c o u n t r y . In t h i s c a t h a r t i c p r o c e s s , all s e c t o r s of society w o u l d p a y d e a r l y , r e w a r d e d o n l y with m a r t y r s . O n l y slowly, a f t e r it had b e c o m e a b u n d a n t l y clear that no g r o u p c o u l d f u l l y w i n this s t r u g g l e , did a p r o c e s s of g r a d u a l r e c o n c i l i a t i o n and h e a l i n g b e g i n , a p r o c e s s that is still u n d e r w a y t o d a y .

The Collapse of the Industrial Alliance T o say t h e least, t h e C o r d o b a z o w a s c l e a r l y an i m p o r t a n t a n d e f f e c t i v e c h a l l e n g e to t h e g o v e r n m e n t . It w a s q u e s t i o n a b l e w h e t h e r t h e g o v e r n m e n t r e t a i n e d a n y l e g i t i m a c y . All t h e s a m e , O n g a n i a a t t e m p t e d to s a l v a g e his

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61

presidency. H e replaced Krieger Vasena, the rest of the e c o n o m i c s team, and s e v e r a l o t h e r m i n i s t e r s on 11 J u n e 1969. K r i e g e r V a s e n a b e c a m e the scapegoat despite the success of his policies. As the underlying tensions were of a largely political nature, however, this ministerial reorganization would not salvage any aspect of la Revolución Argentina, neither the social nor the economic. O n g a n í a as well as the international b o u r g e o i s i e still w a n t e d to profit f r o m the i m p r o v e d e c o n o m i c situation—it s e e m e d senseless to abandon the e c o n o m i c p r o g r a m just as investment surged and the e c o n o m y began to be f u n d a m e n t a l l y m o d e r n i z e d . It was hoped that the political crisis could be separated f r o m the e c o n o m i c advances. At the time, many representatives of the international bourgeoisie felt such a solution was feasible. For e x a m p l e , John T h o m p s o n , an e c o n o m i s t of the Federal R e s e r v e B a n k of N e w York, stated in early 1970: U n d e n i a b l y , the g o v e r n m e n t suffered severe setbacks, losing its image as a source of stability and order, as well as its claim that its s u c c e s s e s were based on "social consensus." [But] on the w h o l e , the government has weathered the storm well during the last year and the essential gains of the Stabilization Program have been preserved. 3 '

T o this end, J o s é M . D a g n i n o Pastore, a n o t h e r " m o d e r a t e liberal," w a s a p p o i n t e d to the e c o n o m i c s ministry. Pastore was bent on continuing with the economic course charted by Krieger Vasena. T h e new e c o n o m i c s minister stated on 13 J u n e 1969 that the government would c o n t i n u e the battle against inflation. Monetary policy was tightened. A devaluation was avoided as it was thought that the run on the peso was speculative and could be controlled and slowly reversed. T h e s e policies were very successful in and of themselves. For e x a m p l e , the speculative run on the national currency during the second half of 1969 was indeed reversed in 1970, resulting in the recuperation of all of the foreign reserves sold by the Central B a n k . 3 2 Investments, as can be seen in Figure 2.6, began to recover although they still remained weak. P a s t o r e ' s t r e m e n d o u s success reflects the rationality of the e c o n o m i c policies in t h e m s e l v e s — t h e p r o b l e m rested in Argentine politics, not in the e c o n o m i c p r o g r a m . T h e political t e n s i o n s quickly resulted in the u n r a v e l i n g of K r i e g e r V a s e n a ' s carefully w o v e n e c o n o m i c tapestry as pressure groups successfully lobbied for special concessions. Within the military, the e c o n o m i c nationalists w e r e s u c c e s s f u l in ensuring the nationalization of the f o r e i g n o w n e d t e l e c o m m u n i c a t i o n s c o m p a n i e s toward the end of 1969, a m o v e that clearly antagonized the continuing attempt to attract foreign capital, as can be seen in Figure 2.7. U p o n the urging of the e c o n o m i c s team and the liberal sectors generally, unions were denied the right to bargain collectively as they had been p r o m i s e d . Shortly thereafter, certain sectors of the military, in an e f f o r t to regain the u n i o n s ' tacit support, w e r e s u c c e s s f u l at l o b b y i n g f o r

62

Resolving

Figure 2.6

the Argentine

Change in Investment in Equipment and Machinery During 1969, by Quarter

1st Q u a r t e r

Source:

Paradox

2nd Q u a r t e r

B a s e d on d a t a f r o m O ' D o n n e i ! 1979.

3rd Q u a r t e r

4th Quarter

Ongania and the Industrial

Alliance

63

large wage increases that resulted in 14 to 17 percent higher costs for wages, an initiative that jeopardized the battle against inflation. Worse, these actions left the unions dissatisfied with the government's policies yet self-assured of their power, an explosive combination. The five-year National Plan for Development and Security that was developed at this time epitomized the contradictory policies the government was trying to follow. One basic thrust of this plan w a s to leave the state apparatus in charge of i n v e s t m e n t in i n f r a s t r u c t u r e , w h i l e r e s e r v i n g large p r o d u c t i v e i n v e s t m e n t s for private initiative. But with i n c o n s i s t e n c y that e s c a p e d n o b o d y , the plan a s s e r t e d that e c o n o m i c g r o w t h b a s e d largely on transnational capital w a s leading to rapid e c o n o m i c concentration and d e n a t i o n a l i z a t i o n . In v i e w of this, the plan stated a c o m m i t m e n t to m a k i n g this pattern o f e c o n o m i c g r o w t h " c o m p a t i b l e " w i t h the p r o m o t i o n and s t r e n g t h e n i n g o f n a t i o n a l c a p i t a l . It a l s o m a d e p r o v i s i o n s for important increases in w a g e s and salaries. It did not, h o w e v e r , bother to detail h o w all these goals would be a c h i e v e d . 3 3

In order to retain the minimal support that it still commanded, the government was forced to offer advantages to all groups. The requisite resources simply did not exist, however. Concretely, this lack of resources manifested itself in a growing budget deficit and the consequent accelerating inflation. In essence, the internal divisions within the military surfaced as the corporatist entities grew more demanding. Links between various military factions and the corporatist entities strengthened, resulting in policies geared toward avoiding imminent crises instead of promoting growth; inevitably, these policies were irrational and inconsistent. All of the advantages honed during two-and-a-half years of Krieger Vasena's stewardship were rapidly evaporating. The economic agenda of the Argentine revolution, at least under the stewardship of Juan Carlos Ongania, had clearly failed.

The Levingston Presidency and the Shift in Coalitions Juan Carlos Ongania's government, in obvious shambles, was overthrown by an internal military c o u p in June 1970. A little-known, lower-level general, Roberto M. Levingston, was chosen to succeed as president. A junta composed of Levingston as well as the head of each military service was created. The junta would, it was hoped, force consensus on the increasingly fragmented military. The result, predictably, was the opposite. Without a single leader able to impose his will on the others, this arrangement "actually contributed to the Balkanization of the state apparatus." 3 4 Each faction within the military operated with increasing independence, trying to further its own

64

Resolving

the Argentine

Paradox

a i m s w h i l e a t t e m p t i n g to v e t o the p o l i c i e s of o p p o s i n g factions. T h e p o l i c i e s that r e s u l t e d w e r e c h a o t i c a n d i n c o n g r u o u s . T h e ruling j u n t a , instead of g i v ing t h e g o v e r n m e n t t h e h o p e d - f o r d i r e c t i o n and c o h e r e n c e , a c t u a l l y tore it apart. P r e s s u r e w a s a l s o m o u n t i n g to c h a n g e p o w e r b r o k e r s within society at large and a m o n g the c o r p o r a t i s t entities. A m a j o r i t y of A r g e n t i n e s called f o r i m m e d i a t e a n d u n c o n d i t i o n a l e l e c t i o n s . T h e P e r o n i s t s and t h e R a d i c a l s , s e e i n g a n o p p o r t u n i t y t o r e t u r n to p o w e r , b e g a n to c o u r t s u p p o r t

more

actively a m o n g t h e c o r p o r a t i s t e n t i t i e s and h e r a l d e d t h e H o r a del P u e b l o , a m a n i f e s t o that called f o r elections. T h e p o w e r b r o k e r s ' claim that the military w a s i n c a p a b l e of ruling t h e c o u n t r y w a s r e i n f o r c e d with the surge in political v i o l e n c e d u r i n g the s e c o n d half of 1970. E c o n o m i c p o l i c y w a s j e o p a r d i z e d not only by the f a c t i o n a l i z a t i o n but a l s o by g r o w i n g i n s t a b i l i t y . T h e i n s t a b i l i t y r e s u l t e d in c a p i t a l f l i g h t a n d d e f e n s i v e a c t i o n s on t h e part of all e c o n o m i c a c t o r s , as is p r e d i c t e d by t h e N o a h ' s Ark m o d e l . 3 5 A c c o r d i n g to this model, individuals sensing a period of c r i s i s d o e v e r y t h i n g p o s s i b l e to p r o t e c t t h e m s e l v e s . M o s t o b v i o u s l y , this m e a n s g a t h e r i n g a n y t h i n g of v a l u e that can be sent a w a y s a f e l y , i n c l u d i n g d o l l a r s ; p e o p l e p r e p a r e t h e m s e l v e s f o r h a v i n g to g o on t h e ark. A l t h o u g h m o s t rational f o r the i n d i v i d u a l , such an o u t l o o k clearly a u g m e n t s the social a n d e c o n o m i c b r e a k d o w n that is d e t r i m e n t a l to the society as a w h o l e . In the m i d s t of this c h a o s , t h e n e w e c o n o m i c s m i n i s t e r , C a r l o s M o y a n o L l e r e n a , insisted on a t t e m p t i n g a l o n g - t e r m e c o n o m i c stabilization p r o g r a m s i m i l a r to that of K r i e g e r V a s e n a . J u s t as h a d his p r e d e c e s s o r , L l e r e n a o r g a n i z e d a voluntary price freeze and instituted a new c o m p e n s a t e d devaluation. H e h o p e d t h a t t h e s e t w o p o l i c i e s w o u l d i m p r o v e t h e b a l a n c e of

payments

s i t u a t i o n w h i l e k e e p i n g a lid on i n f l a t i o n . In reality, h o w e v e r , b o t h g o a l s w e r e jeopardized as inflationary expectations j u m p e d . [0]n the one hand, his adjustments broke the 1967 exchange norm by yielding before expectations, which was construed as a show of weakness, and on the other hand, it was not large enough to convince Argentines that this would be the "last" devaluation. The result was that the devaluation, although compensated tor, impacted on the price level and gave way to the creation of new inflationary and exchange expectations.-* 6 A s if the e c o n o m i c p o l i c y did not f a c e e n o u g h p r o b l e m s , it w a s f u r t h e r c o m p r o m i s e d by t h e m i l i t a r y ' s v e t o i n g a w a g e f r e e z e f o r f e a r of u n i o n o p p o s i tion; e v e n t h e liberal f a c t i o n s of t h e military f e a r e d that the g o v e r n m e n t c o u l d l o s e c o n t r o l in t h e f a c e of n e w l a b o r u n r e s t . F u r t h e r , L l e r e n a u s e d — a l m o s t certainly in r e s p o n s e to political p r e s s u r e — t h e n e w f u n d s created t h r o u g h t h e c o m p e n s a t e d d e v a l u a t i o n (by w a y of an e x p o r t tax on agriculture, as had b e e n t h e c a s e u n d e r K r i e g e r V a s e n a ) f o r social b e n e f i t s p r o g r a m s . T h i s p r o m o t i o n of c o n s u m p t i o n c o n t r a s t e d m a r k e d l y with the i n c r e a s e d i n v e s t m e n t that o c -

Onganía

and

the Industrial

Alliance

65

c u r r e d in t h e c o m p a r a b l e p e r i o d under K r i e g e r V a s e n a . S i m p l y put, an e c o n o m i c p r o g r a m s i m i l a r to that i m p l e m e n t e d in 1 9 6 7 w a s not f e a s i b l e in the f a c e o f political disintegration and e c o n o m i c e m e r g e n c y . W i t h the c o n t i n u e d i m p l e m e n t a t i o n o f an u n w o r k a b l e e c o n o m i c p o l i c y , a " d e f e n s i v e a l l i a n c e " b e t w e e n the C G T and the C G E w a s

coalescing.

L e v i n g s t o n b e l i e v e d that he could c o n s o l i d a t e his own p o w e r by c h a n g i n g to an e c o n o m i c

policy

more favorable toward these corporatist

entities:

L e v i n g s t o n w a s d e t e r m i n e d to radically shift e c o n o m i c c o u r s e and c r e a t e a new a l l i a n c e b e t w e e n the C G E and the C G T . In O c t o b e r 1 9 7 0 , L l e r e n a was replaced

with

Aldo

Ferrer,

a nationalist-oriented

economist.

Shortly

thereafter, L e v i n g s t o n f o r c e d the resignation o f F r a n c i s c o M a n r i q u e , the last liberal in the c a b i n e t , as well as the liberal g o v e r n o r o f C ó r d o b a . A f u n d a m e n t a l a s p e c t o f this a l l i a n c e w a s — a s is c o m m o n to m o s t A r g e n t i n e g o v e r n m e n t s — f i n d i n g r e s o u r c e s that could be redistributed to the signatories. Part c a m e f r o m the increased tax receipts f r o m the c o m p e n s a t e d devaluation described a b o v e , although not nearly enough. A desperate attempt w a s m a d e to a u g m e n t the supply o f credit for the national

bourgeoisie.

P o l i c i e s were devised so that all national capital was reserved for A r g e n t i n e , as o p p o s e d to m u l t i n a t i o n a l , f i r m s . D u e to a series o f c o m p l e x

financial

regulations and guarantees, h o w e v e r , this policy resulted in the de f a c t o use o f foreign loans (see F i g u r e 2 . 8 ) , which f o r e b o d e the debt crisis o f the 1 9 8 0 s , to s u b s i d i z e this f u r t i v e c o a l i t i o n . 3 7

O n c e again, immediate

economic

b e n e f i t s were sought at the cost o f postponed but significant s a c r i f i c e s .

Figure 2.8

Foreign Debt, 1966-1973 7000

6000 o

Q

•a

c

1

5000 4000

2 3000

2000 1000

-

m1 n n n 1 II 1 II IIH H H I I I I 1 II II H « H I 1966

1

1967

1

Public Foreign Debt Source:

1968

1

1969

1970

j

Based on data from de Pablo and Martinez 1988.

1971

1

j

1

1972 ' 1973

1

Private Foreign Debt

66

Resolving

the Argentine

Paradox

T h e r e w a s s o m e r e c o v e r y d u r i n g t h e first q u a r t e r of 1971, but it w a s a far cry f r o m t h e 8 p e r c e n t real i n c r e a s e that F e r r e r w a s p r e d i c t i n g . M o r e o v e r , the g r o w t h c a m e at t h e c o s t of s k y r o c k e t i n g and u n c o n t r o l l a b l e i n f l a t i o n . In an i m p l i c i t a v o w a l of his i n c a p a c i t y to c o n t r o l t h e i n f l a t i o n rate, F e r r e r stated that "inflation originated

in ' s t r u c t u r a l p r o b l e m s a n d

sectorial

conflicts,' [whichl would disappear once development was achieved."38 Such

e x p l a n a t i o n s did not o v e r c o m e C G E ' s

and C G T ' s

trepidations

r e g a r d i n g a military g o v e r n m e n t that had so recently b e t r a y e d b o t h g r o u p s ; d e s p i t e t h e s h i f t in p o l i c y , a n e w a l l i a n c e c o u l d n o t b e s u c c e s s f u l l y forged.

F i g u r e 2.9

A n n u a l I n f l a t i o n R a t e , J u l y 1 9 6 9 - A p r i l 1973

80-

/

70-

60SO40-

A

30-

J

/

t

r

r

2010-

O N ^ o O O O

Q.