The Collapse of Argentina part 4 (conclusion): the incredible shrinking

On July 15, 1955, two months before he was overthrown by the 
military, Juan Perón said:

"The Perónist Revolution has ended; now begins a new constitutional 
stage without revolution … I have ceased to be the leader of the 
National Revolution in order to become President of all the 
Argentines."

The notion that he could unite all Argentines regardless of class is, 
of course, false. While Perón was not what one could call a 
theoretician, he did try to put forward a rudimentary class analysis 
in "Force is the Right of Beasts". According to Donald Hodges, he 
interpreted the 1955 military coup as a showdown between two classes. 
In Hodges's words, there was "the productive class of manual, 
technical and intellectual workers who allegedly consumed only what 
they produced; and the parasitic class consisting of the oligarchy, 
the clergy, and the professional politicians who lived off the 
surplus created by the productive class."

This alignment, which evoked the political philosophy of Saint-Simon, 
could not begin to do justice to the complex social relationships 
within Argentina and on an international level in the mid-1950s. 
Rather it evoked the French Revolution with its notion of a parasitic 
class. Missing from this account is any explanation why the fraction 
of the national bourgeoisie based in manufacturing, as well as large 
segments of the professional middle-classes, would abandon his 
Justicialist project. Surely, the answer was not "treason", but 
rather diverse classes acting on distinct material interests.

Perón had failed to realize that the national industrial bourgeoisie 
had already begun to become integrated with North American capital. 
In some ways this paralleled the symbiotic, but dependent, 
relationship the pampas bourgeoisie had to British capital a century 
earlier.

During his years in exile, Perón always believed that the alliance 
between the working class and the industrial bourgeoisie could be 
reconstituted, but inexorable economic processes would militate 
against that outcome. From 1955 until his return to power in 1973, 
the Argentine bourgeoisie would find itself more and more co-opted by 
US imperialism or--alternatively--put out of business. The objective 
conditions for a neo-Perónist project would have been eroded beyond 
repair long before his arrival at the Ezeiza airport in 1973.

To start with, Perónism had opened the door a crack to US business 
for reasons that had nothing to do with an ideological affinity for 
Uncle Sam. Of course, once that door was opened, the jackboot of the 
US multinational would come crashing through. We should recall that 
Perón had instituted a sweeping program of nationalizations that 
affected European interests generally and Great Britain in 
particular. As such, the US became the logical trading partner, 
despite the fact that Great Britain conspired with Washington to 
block the ability of Argentina to buy American capital equipment as I 
discussed in my last post.

Argentina was also forced to look to the United States because of the 
limitations of Perónist economic policy, which fell far short of 
socialism. By failing to carry out radical land reform and failing to 
nationalize agro-export related industries, such as meatpacking and 
sugar refining, etc., Argentina failed to provide an adequate 
financial basis for future industrial development. By contrast, the 
seizure of Cuban sugar, tobacco and cattle production had not only 
created a strong base of support for the revolution among 
field-hands, it had also helped to make foreign exchange available 
for native industry such as the new bioengineering enterprises.

In the aftermath of the overthrow of Perón, solutions were put 
forward that combined deeper integration into imperialism with 
half-baked "developmentalist" theories. Perhaps nobody exemplified 
these contradictory impulses more than Raul Prebisch, whose "Prebisch 
Plan" was adopted both by the military coup that removed Perón in 
1955 and by the Arturo Frondizi government that succeeded it 
(1958-1962).

Prebisch was the commissioner of the United Nations Economic 
Commission for Latin America (ECLA) prior to his involvement with the 
post-Perón regimes. In this capacity, he developed a theory of 
"import substitution" which urged "peripheral" countries to foster 
native industry in a protectionist framework or else risk being 
swamped by the vastly superior power of "core" nations. He was a 
major influence on other UN economists, including Brazil's Celso 
Furtado, Samir Amin and Andre Gunder Frank--all of whom would become 
identified with the "dependency" school of the 1960s grouped around 
the Monthly Review.

Unlike those whom he influenced, Prebisch was no leftist. As an 
economic adviser to the military government that ruled Argentina 
prior to Perón, he proposed the creation of a central bank, whose 
directorship he would occupy between 1935 and 1943. During this 
period, Prebisch was deeply involved with negotiations that would 
result in the Roca-Runciman Treaty that most Argentine nationalists 
regard as a sell-out to Great Britain. Indeed, his role in this was 
no surprise to those who had been following his career from the 
beginning. During the 1920s and 30s, he was on the staff of the 
Sociedad Rural Argentina, the bastion of the landholding elite.

Because of his questionable background, he was excluded from holding 
any important posts in the Perón administration. Instead, he took a 
job with the United Nations where he began to think through 
developmentalist strategies for Latin American countries.

Once he had the ear of the post-Perónist military coup leaders and 
the Frondizi administration that followed it, Prebisch recommended 
solutions that bear scant relationship to the redistributive approach 
that brought him fame in some quarters.

The Prebisch Plan incorporated two essential criteria:

1. It would backtrack from what most would consider the mildly 
exploitative treatment of agribusiness during the Perón years. The 
plan would not only actively promote farm exports, it would make sure 
that the landed gentry receive a larger share of revenues than 
realized during the Perón years. (One suspects that this decadent 
class would waste the surplus on shopping trips to London, but I have 
no citation for this.)

2. It would suppress the import laws, which protected young 
industries against foreign competition. Under Frondizi, two laws were 
passed in 1959 and 1961 that threw open the doors to foreign 
investment. According to NACLA, "the first gave foreigners the same 
rights as local investors, opened up new industrial sectors 
(automotive and petrochemical), granted special privileges to 
investments in the exploitation of raw materials (petroleum) and 
exempted imports of certain capital goods from custom duties. 
Finally, profit transfers out of the country were freed of all 
restrictions, except those stipulated at the initial point of 
investment, and could be made without special authorization."

This plan would reveal Prebisch to be about as committed to his 
developmentalist ideology as Enrique Cardoso was, who a generation 
later would toss all his "dependista" books out the window after 
becoming president of Brazil, where he pursued a vicious neoliberal 
economic policy. (What lessons can we draw from their behavior? It 
leads us to question the long-term value of a developmentalist 
economics that stops short of Marxism. No matter how much lip service 
you pay to the interests of the "peripheral" nation, as long as you 
refuse to break with imperialism, there will be intense pressure to 
be "practical". Revolution is never "practical" but it really is the 
only solution.)

The impact of the Prebisch Plan was dramatic. In 1959-1960, new 
foreign investments reached $576.3 million as opposed to the $16 
million between 1951 to 1955 under Perón, and $257.7 million in the 
coup years of 1956-1958. As opposed to the modernization schemas of 
Walt Rostow and his sympathizers on the left--conscious or 
otherwise--foreign investment was a disaster. Bankruptcies went up 
from an average of 67 a month in 1960 to 107 in 1961, to 153 in 1962.

Illia, a Radical Party politician, succeeded Frondizi. This 
middle-class formation was much better situated to carry out 
pro-imperialist policies than the parties of the pampas bourgeoisie, 
since it had a history of struggle early in the century. Whatever its 
past glories, it could do nothing to reverse Argentina's drift to an 
impoverished status. Consequently in 1962 Perónista candidates were 
elected to the legislature, but a year later they were banned from 
participating altogether in order to prevent a return to the past.

Although Illia came to power on the basis of repudiating Frondizi's 
pro-imperialist policies, inexorable pressure from core countries 
pushed him in the same direction. He replaced Prebisch with Adalbert 
Krieger Vasena, a member of the corporate elite, who would remain in 
his post even after the military came to power once again under the 
brutal Ongania dictatorship. In 1971, when Ongania was in power, 
Krieger sat on the boards of 12 multinational subsidiaries in 
Argentina. He attempted to resolve Argentina's impasse by undoing the 
policies that had favored the rural bourgeoisie, but he also pushed 
for a deepening of the open door policy toward foreign investment 
that had marked the Prebisch Plan.

As was the case during the Frondizi administration, bankruptcies 
swept across the country but at even more accelerated pace. They grew 
from 1,647 in 1968 to 2,982 in 1970. As NACLA points out, "Local 
companies which could not compete with the advanced technology of 
foreign corporations and which could no longer afford expensive 
capital imports disappeared and automatically gave up their share of 
the market to remaining firms. Thus Coca-Cola and Pepsi gained 
control of 75 percent of the soft-beverage market."

Between 1963 and 1971, foreign companies bought more than 53 
Argentine firms. The acquisitions were in every critical area: 
automotive, chemical, petrochemical and metallurgical. Nine of these 
companies were among the top 120 in Argentina when the NACLA pamphlet 
was written in 1975. If anything, the process has only accelerated in 
the intervening years.

Krieger also gave a green light to foreign financial firms. Between 
1967 and 1969, foreign companies bought 19 local banks. US and 
European banks, who had been restricted by law to activity in the 
Buenos Aires region, now instituted branch banking throughout the 
country. In 1975, foreign banks controlled 17.5 percent of all 
deposits, 24 percent of all industrial loans and 18 percent of all 
commercial loans.

In 1955, the year Perón was overthrown, foreign corporations assumed 
8 percent of industrial production. By 1972, on the eve of his return 
to power, the percentage had increased to *40 percent*. Foreign 
investment would total $1.3 billion in the same period. This 
investment did not have the same character as investment by one 
advanced capitalist nation in another, as for example when the USA 
sets up a plant in Great Britain. Or vice versa. Foreign investment 
in Argentina produced a capital drain that impoverished the nation. 
Between 1960 and 1971 $853 million flowed out of the country. This is 
what Lenin called super-profits. NACLA summarizes the impact:

"The primary force behind the post-1955 thrust of imperialism has 
been the United States. North American capital made 70 percent of all 
new direct foreign investment between 1959 and 1969. By 1973 the book 
value of U.S. investments in Argentina was reported at $1.3 billion 
(or 56.5 percent of all foreign investment in the country). Four 
branches of industry absorbed 80 percent of all U.S. capital: 
chemical and petrochemical; plastics and glass; metallurgical, 
mechanical and electrical appliances; and automobiles. These sectors 
are precisely those which have been completely monopolized by foreign 
corporations and the U.S. holds a substantial share of that 
monopoly."

It is this economic data that allows us, in contrast to Chris Harman 
of the British SWP, to allege that Argentina is and was a neocolony.

Imperialist penetration of Argentina not only led to the ruination of 
local industry and a degradation of living standards for the working 
class, it also tended to deepen the political ties to the USA among 
the elites who benefited from American investment. This new alignment 
of class forces would weaken Perón's ability to rule in the name of a 
multi-class alliance after his return in 1973. With an important leg 
of his stool missing, the whole structure was difficult to keep 
standing.

Perónism's return to power was marked by bitter fighting between 
those who wanted to cater to the interests of the compromised 
industrial bourgeoisie and the old agrarian elites and those who 
wanted to push the Perónist project in a radical, if not socialist 
direction.

Unfortunately, the radical Perónists in the guerrilla movement 
combined the worst elements of Perónism and Guevarism, the source of 
the new radicalism that erupted in the period after 1974. They drew 
the most schematic conclusions from the Cuban Revolution, while 
tailing an ever more rightward shifting Juan Perón.

The Montoneros, no matter their personal courage and their dedication 
to a more just society, mixed all the worst aspects of ultraleftism 
and reformism. When Perón introduced a "Social Pact" that required 
trade unionists to sacrifice in the name of progress, just as was the 
case under Frondizi and Illia, some elements of the Perónista left 
protested vigorously. On January 30, 1974 the Perónist Armed Forces 
(FAP) denounced the strategy of allying with the national 
bourgeoisie. In contrast, the Montonero journal stressed the need to 
maintain an alliance with the middle sectors of the national 
bourgeoisie. Later that year, the Montoneros adopted a new program 
titled, "Rechannel the Perónist Movement as the Axis of 
Liberation--Reconstruct the Front under the Hegemony of the 
Workers--Recover the Government for the People and for Perón." 
Unfortunately, Perón and the people had parted ways long ago.

For the next few years, the army and cops fought a low-intensity 
warfare with Perónista rebels of one sort another (and with the 
Guevarist/Trotskyist ERP) under a nominally democratic government 
under Perónista control. After Juan Perón's passing, his wife 
administered a government that combined anti-working class austerity 
and repression of the left. When this proved insufficient to maintain 
the smooth operation of capital, she was pushed aside and replaced by 
a succession of military governments: Videla, Viola and finally 
Galtieri.

The Generals attempted to resolve the contradictions of the Argentine 
economy by a new round of "primitive accumulation" that would finance 
future expansion through wage cutbacks. A new round of 
deindustrialization marked this period. Between 1975 and 1980, the 
percentage of imported capital goods increased from 25.4% to 50.2%. 

William C. Smith points out:

"By 1981 total industrial production was 17 percent less than in 
1975. In the important metallurgical sector, total physical output 
declined 25 percent in 1980 and an additional 45 percent in 1981 when 
the full impact of previous policies began to be felt. Even the 
sectors originally selected to play a strategic role were in full 
crisis by 1981. The petrochemical sector was operating at only 50 
percent of installed capacity, chemicals at 45 percent, steel at 54 
percent, and even the once dynamic automotive sector limped along at 
a mere 25 percent of installed capacity."

After Galtieri seized the Malvinas, his erstwhile allies in the USA 
and Great Britain turned on him and tightened the screws on the 
Argentine economy. A new round of popular unrest, with a strong base 
in the Perónista movement that had not been exterminated during the 
"dirty war", led to the return of "democratic" governments that had 
all the spinelessness of the Frondizi and Illia regimes.

Since the post-Perón years had been marked by such a severe economic 
contraction, a partial recovery during the Alfonsin years led some to 
believe that Argentina was some kind of economic miracle. This sort 
of bourgeois propaganda was also applied to the Pinochet "miracle" in 
Chile, which had simply made some progress in returning to the 
standards that were commonplace during Allende's administration 
before US economic subversion succeeded in destroying a promising 
experiment.

Alfonsin's administration was marked by hyperinflation that robbed 
that diminished the purchasing power of the working class. Just after 
he was voted out of office, to be replaced by Raul Menem, the July 7, 
1989 Journal of Commerce reported:

"Five-and-a-half years after Mr. Alfonsin took power, his economic 
record was as dismal if not worse than the one left by the military 
regime he succeeded in December 1983. 

"Inflation rose to a one-month record of over 100 percent in June, 
according to private economists, up from a 78.5 percent increase in 
May. 

"Official statistics show that unemployment rose to 6 percent from 
about 4 percent since Mr. Alfonsin took office. Local news reports 
say hundreds of thousands of workers were laid off this year as 
inflation crippled production. 

"Workers' salaries lost nearly half of their purchasing power after 
the Radical's August 1988 Spring Plan backfired in early February, 
spurring price increases and putting the Argentine currency on a 
nose-dive, in which it lost over 96 percent of its value against the 
dollar. 

"Argentina's foreign creditors have virtually cut the country off 
from fresh funds sources after it stopped servicing most of its $ 60 
billion external debt in April 1988. It has piled up over $ 3.5 
billion in interest arrears since then."

Since the Menem debacle is familiar to most people reading this 
article, there is no need to rehash the last 13 years of Argentine 
economic history. Let me conclude with some brief observations. 
Argentina's problems are most often attributed to the IMF. While the 
IMF is a big problem, it is not the primary cause. To focus on the 
IMF is like focusing on the part of the dandelion that is visible on 
the surface of your lawn. If you cut the flower at the stem, it will 
only grow back. You have to dig deep down and get to the taproot. 
That taproot is called capitalism.

Argentina borrows money from the IMF and imperialist financial 
institutions because it suffers from what dependency theorists used 
to call "unequal exchange". In the epoch of imperialism, countries 
that rely on agricultural export suffer from declining commodity 
prices, while those that rely on manufacturing, finance and high 
technology can take advantage of their competitive edge. Neoliberal 
economics posits a world economy where those countries that are 
geared to agro-export do what they do best, while the manufacturing 
countries do what they do best. Anti-globalization protestors all 
around the world and the piqueteros of contemporary Argentina, a new 
generation of 'descamisados,' are now challenging this fiction. For 
Argentina to finally enjoy on a permanent basis the fruits that were 
first tasted during the early years of the Perón administration, it 
will have to break its ties with the global capitalist system, 
liquidate the local bourgeoisie and begin planning on a rational 
basis for human need. Needless to say, the methods they use to 
achieve that goal will have to be worked out by the mass movement led 
by a Marxist revolutionary organization.

Sources: 

1. Donald C. Hodges, "Argentina 1943-1976: The National Revolution 
and Resistance" (U. of New Mexico, 1976)

2. North American Congress on Latin America, "Argentina in the Hour 
of the Furnaces" (1975)

3. William C. Smith, "Authoritarianism and the Crisis of the 
Argentine Political Economy" (Stanford, 1989)

-- 
Louis Proyect, lnp3@panix.com on 05/20/2002

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