Everybody has a plan
While the vulture fund issue has occupied centre stage ever since Argentina was declared in “selective default” almost a fortnight ago, it would be inaccurate to say that everything is on hold pending the final outcome (however crucial that might be). The government is alternatively seen as playing up the clash with the vulture funds for all it is worth in terms of the political gains from the patriotism aroused and secretly hoping that the talks between international banks and holdout creditors produce an agreement to make the whole problem go away but regardless of which scenario is valid, there is an agenda unfolding quite independent of the big showdown. Congress is being reactivated in order to approve a moratorium permitting the payment of half a million new pensions and to launch a consumer court system while job protection measures have been announced without waiting to see how recessive the deadlock with international credit markets proves to be. Businesses might be enthusiastic about state assistance to meet payroll costs and distinctly less keen on future consumer court policing but they cannot deny that the government is taking action on the problems of the real economy which concern them (and ultimately everybody), not betting everything on a patriotic upsurge which overshadows all the problems. Indeed there were contacts yesterday between the economic team and the Argentine Industrial Union (UIA).
The government could not rest on its laurels forever on a “won decade” model which was already running into serious problems years before push came to shove in the New York courtroom tussle. The recent measures have in common trying to intensify the model’s core strategy of consumer-led growth in the face of newly adverse circumstances. The default deadlock threatens to weaken the supply of consumer goods via less investment and less dollars to import industrial inputs while the general expectation of more pesos being printed to counter the greenback shortage could lead to people saving up in hard currency rather than shopping, thus destroying jobs (clearly President Cristina Fernández de Kirchner’s main anxiety in her speech last Thursday). The new pensions and the protection of jobs (and thus wages) is designed to boost demand as supply falters while the consumer courts are to correct the likely imbalances.
Not even every Keynesian economist will agree with this approach but the main point here is to stress that there is a government economic strategy underway to be approved or resisted beyond “fatherland or vultures.”