January 18, 2018

Guest columnist

Monday, July 14, 2014

Reflections on my populist country

By Carlos Alfredo Rodríguez
For The Herald
For years we’ve had price controls and exchange controls too. The most recent addition was interest rate controls. Missing from the market are cars, new construction, meat, motorcycles, medicine, flour, sugar, spare parts, etc. The only remaining thing to buy is a television set on which to watch the World Cup, on the official channel, of course. Circuses we have, too bad the bread disappeared!

The next thing to dry up will be credit for the smallest of institutions. All credit will go to the government and its business cronies. They won’t get sufficient financing at low rates and will print money to pay for the party. Inflation will increase and production will fall. This is an old story and we know it ends badly.

Such misfortune, in varying versions, has been suffered by all generations of Argentines living today.

Economic chaos is one of the inevitable consequences of the political system known as populism. And populism is precisely what we have in excess.

Decades of domination under populists from the left, right, democratically elected, the military, etc., have devastated the civic culture of many Argentines and our institutions. Populism is one of the worst social ills. It distributes what it doesn’t have, destroys incentives to produce and collaborate, and encourages confrontation by creating imaginary enemies who help maintain the cohesion of the dominated group.

Populists thrive on manipulating the most basic needs of the masses and their favourite tools have been the same for thousands of years: bread and circuses. For them education is not an instrument, but rather an annoyance. An educated population is the greatest obstacle to the spread of populism.

Unfortunately populism invites emigration of the most educated, and thus society finds its ability to defend and change diminished. A vicious cycle.

About 50 years ago, Enrique Oteiza wrote about the problem of emigration of our scientists abroad (brain drain) due to the lack of local demand for their work. Today, the situation is much worse: many young people plan their education with the deliberate intention of emigrating because the populist system does not offer the quality of life to which they aspire.

Propaganda and information are other matters. Without control of both, a populist leader cannot remain on top and risks being replaced. Notorious examples are our current government’s control of the media and its manipulation of statistical information through the INDEC.

It’s practically irrelevant who replaces the leader here because populism is deeply rooted in all aspects of society and it’s the system that defines the rules of the game. A new leader who doesn’t follow them quickly falls victim to a popular, military or trade union revolt, social contempt, or a combination of them all.

Populist values have long been installed in our institutions making it more difficult to bring about change from within. To put it crudely: society does not know how to ask for anything very different from what it has. The political opposition’s only proposal is that it be given the government... to continue with populism, but in its own way.

Our populism most definitely does not share the basic principles of work ethic, savings or productivity of the modern capitalist world, be they English, US, Chinese, Korean, Japanese, Vietnamese or Chilean, to name a few. In these societies, the individual is someone who works to comply with society. In Argentina, those who live from populism perceive work as foolish or the result of someone enslaved by an unscrupulous businessman. He who lends to us is a usurious vulture and he who sells is a monopolist. In other words, it is well regarded that debts are not paid, prices are controlled and wages are adjusted by decree.

Our populism, failing to generate decent jobs, has resorted to a patronage system that offers “no work” plans, massive “special” retirement benefits without the need to have contributed, tax pardons, and television, soccer and cars “for all.” Even worse, the government is financed primarily by employment taxes. Doesn’t this in itself portray a negative view toward labour?

In most of the world, a successful individual is admired, he’s a Bill Gates. Here, he’s considered a thief almost by definition. The values which predominate are those of a rentier society; the system eagerly waits for the next rent to come along and help it through. Before it was livestock (to have the “Vaca atada”), today it is soybeans, and tomorrow it will be Vaca Muerta (shale oil). Populism, by disrespecting property rights discourages productive investment and generates incentives for rent-seeking and unproductive privileges.

In spite of the negativisim, I feel that the situation warrants it. The first step to solving a problem is to recognize it. Our main problem is not Kirchner, Menem, de la Rúa, Uriburu, Yrigoyen, Perón, nor Rosas.

They’re all gone, but the problem remains: populism is deeply rooted in our society, from individuals to institutions.

We need a profound institutional change that limits the workings of the populist system and helps convince Argentines of the virtues of the value system and market incentives that govern the vast majority of the civilized world today.

Other countries in Latin America and the world are making changes in the right direction. The task is difficult because there is no simple solution. This, however, should not deter us from trying, as the direction of necessary change is perfectly clear.

Skilled in the methods of populism, Goebbels was atributed with the idea that “if you repeat a lie often enough, it becomes the truth.” Those who BELIEVE in the possibility of a change should say “keep repeating what you believe is right, until it becomes the truth.”

*Carlos Alfredo Rodríguez is dean of the Argentine Centre of Macroeconomic Studies

University (UCEMA).

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