The Guardian view on Argentina's presidential election: the danger to democracy is real: Editorial
Last edited Mon Oct 2, 2023, 03:24 AM - Edit history (1)
Public spending hikes and pro-poor tax cuts might fix the economy and be popular enough to stop the far right
Sun 1 Oct 2023 13.25 EDT
With poverty rising, a recession approaching and annual inflation topping 120% in Argentina, it is unsurprising that voters are fed up. They would be forgiven for wanting change in the upcoming presidential election. However, voting for a far-right candidate, Javier Milei, would be a serious mistake. Mr Milei admires Donald Trump, trades in misogyny and says the outrageous to get noticed. Despite what Mr Milei claims, the Pope is not an emissary of the “evil one” nor is the climate crisis “a socialist lie”.
After winning Argentina’s primary election this summer, Mr Milei is, depressingly, in pole position to clinch the presidency. His pitch is that Argentina’s interventionist, welfarist economic model has failed. Mr Milei is a fan of the free market missionary Milton Friedman. He thinks inflation results from too much of the Argentinian currency, the peso, being in circulation. Mr Milei’s solution is to shrink the state and replace the peso with the dollar. Friedman’s ideas have been debunked. But they are held with religious fervour by adherents such as Mr Milei.
Argentina’s problems are not fiscal, caused by excessive government spending, but external, caused by excessive borrowing in US currency. This came to a head in July when the country found itself on the brink of a dollar default, until the International Monetary Fund agreed to a bailout. The economy minister Sergio Massa, who convinced the IMF that a freak drought had wiped out Argentina’s dollar export earnings, will probably end up in the presidential runoff with Mr Milei. Mr Massa’s greatest strength – and biggest weakness – is the economy. He was brought in last August with the peso in freefall. Since then he has seen the economy grow after months of shrinking.
Mr Massa took the IMF money, but seems to be paying lip service to the lender’s conditions. Instead of reining in spending, he has turned on the taps. His strategy rests on high interest rates to make the peso more attractive than the dollar, cutting taxes for the poor and raising public spending. This should be popular – and could work. The plan seems to mirror an argument made by the economist Matías Vernengo, who criticised the IMF for pushing ideas that benefited the international creditors it represented: “What they want is a fiscal adjustment to shrink the economy, import less and accumulate dollars. Let people die while you accumulate reserves.” The academic is right that Argentinians instead need to desire “pesos and not dollars”.
More:
https://www.theguardian.com/commentisfree/2023/oct/01/the-guardian-view-on-argentinas-presidential-election-the-danger-to-democracy-is-real