October 23, 2014
Method in the muddle
Economy Minister Axel Kicillof’s pilgrimage to Washington DC has not marked the policy watershed which might once have been expected from such a signal break with the thrust of Kirchnerism ever since the late Néstor Kirchner paid his way out of International Monetary Fund tutelage at the start of 2006. In part this is because Kicillof made every effort to airbrush the IMF out of the picture, denying any agreement with it and standing by the Cristina Fernández de Kirchner administration’s bid to keep the IMF out of any Paris Club debt settlement — indeed some official accounts of his Washington visit almost made it sound as if its sole purpose was the meeting of his G20 colleagues rather than the annual general assembly of the IMF and World Bank (or contacts with the United States government). But this rhetorical distance from the IMF seems in direct proportion to the number of steps Kicillof has taken to accommodate it (among other critics) in recent weeks — correcting inflation and growth statistics, slashing utility rate subsidies, compensating Repsol for the 2012 YPF expropriation, negotiating with the Paris Club as from next month and (last but not least) adopting orthodox monetary policy instruments such as devaluation and jacking up interest rates.
Yet the confusion here is both broader and deeper than the eternal mismatch between rhetoric and reality. Hardly anybody would disagree that the ongoing economic policy corrections are in fact correct (and if they do, they are hypocrites because they have been urging all the moves listed above for years) and nor can the CFK administration really complain if it is now paying a steep political price for what should have been done long ago. But the price being paid is not only government popularity — these unavoidable corrections are proving logically recessive, even though the set of social safeguard measures recently announced. Hence the confusion between policy, strategic aims and rhetoric all moving in different directions.
But this confusion could still prove constructive. Argentine economic thought has always been too absolutist — lurching from extremes of the free market to state intervention (both with their justification at the time). Today policies heading straight towards recession (especially when the social inclusion buffer still in place from the past decade starts wearing thin) with a return to currency crisis and accelerated inflation might be abruptly reversed if Argentina finally strenghens groping towards a permanent and genuine mixed economy through a trial-and-error method.