National Review / Digital
Cristina’s Whirl
Argentina heads into troubled waters


Tragedy is often a vote winner, and particularly so in a place like enthusiastically morbid, histrionic Argentina. Cristina’s approval ratings jumped 25 points. As a character in a novel by Argentine author Tomás Eloy Martínez once said, “Every time a corpse enters the picture in this country, history goes mad.” A black-clad Cristina threw her widow’s weeds into the political battle with aplomb, gusto, and tears. Néstor (“he is watching, he is here, isn’t he?”) haunted her speeches and her rallies, transformed into the lost leader who sacrificed all. It worked. Wander around Buenos Aires, a city more skeptical about the Kirchners than most, and you will see numerous stenciled graffiti of Néstor as El Eternauta, an iconic Argentine cartoon figure who traveled through time and space, and to the left. Cristina, already Evita, also became Juan to Néstor’s Evita, keeper of the martyr-spouse’s flame.

The economy lent a large hand. By year’s end, GDP will have grown by over 90 percent since its 2002 nadir. The spoils of success have been spread around. Thanks to better times, unemployment has been more than halved from 2002’s 20 percent. The number of those in poverty has fallen sharply. Income inequality has shrunk. Social spending has leapt. The descendants of Evita’s descamisados (the shirtless) knew whom to thank. Throw in a divided and uninspiring opposition, and the rest was victory.

The worry is what comes next. Growth is forecast to ease to a still impressive 4–5 percent in 2012 (after a little over 8 percent this year), but envious PIIGS should be aware that there’s plenty of snake oil in the Kirchner cure, and danger too. Revving up the demand side can work (and has worked), as can devaluation, but, like steroids, such policies are best not overdone. And they have been overdone. Officially running at a fantasy-math 10 percent, inflation is now thought to stand at around 25 percent, a level that has been eroding the devaluation advantage (the trade balance has deteriorated in recent years). Price controls, whether direct (such as those on utilities) or indirect (export taxes), have merely forced this inflation to express itself through shortages and underinvestment, a variant of the distortions now emerging as a result of the country’s growing protectionist tilt.

With public spending still roaring ahead, a cash crunch is drawing closer, exacerbated by the way that the 2001 default and its heavily litigated aftermath have (and perhaps this is just as well) constrained access to international capital markets. The government has taken to raiding the central bank’s foreign-currency reserves to pay those overseas debts it does acknowledge. In a different smash-and-grab, private pension funds worth $24 billion were nationalized in 2008 (in the pensioners’ best interest, of course), a move that also boosted the state’s ability to meddle in some of the country’s largest companies, a temptation that it will probably find difficult to resist: The Kirchner years have already seen the outright nationalization of a number of enterprises.

The markets have read the runes: Foreign direct investment in Argentina has slowed sharply and the locals have followed suit. Capital flight is accelerating and is now estimated at $3 billion per month, something that has provoked a draconian response, even if reserves (for now) remain reasonably healthy. Just after the election, Kirchner launched a new series of initiatives designed to bring dollars back home. These included ordering the country’s energy and mining businesses to repatriate their export revenues, and compelling insurance companies to cash in their foreign investments by year’s end. These diktats were another display of an authoritarianism that has become more visible as the economic miracle comes under pressure. Economists have been fined for publishing inflation data that differ from the official spin. The inconveniently independent president of the central bank was forced out with the assistance of questionably legal maneuvers. The tactics deployed in the long struggle against the giant Clarín media group have become ever rougher, and show little respect for the idea of a free press. Under the circumstances, Kirchner’s fondness for Hugo Chávez is no surprise, nor is her recourse to conjuring up a handy foreign devil: that “crude colonial power in decline,” Malvinas-stealing Britain.

This is unlikely to end well.

– Mr. Stuttaford is a contributing editor of National Review Online.

November 28, 2011    |     Volume LXIII, No. 22

Books, Arts & Manners
  • Tyler Cowen reviews Keynes Hayek: The Clash That Defined Modern Economics, by Nicholas Wapshott.
  • Richard Brookhiser reviews Masscult and Midcult: Essays Against the American Grain, by Dwight Macdonald.
  • Joseph Tartakovsky reviews Design for Liberty: Private Property, Public Administration, and the Rule of Law, by Richard A. Epstein.
  • Jacob Mchangama reviews Silenced: How Apostasy and Blasphemy Codes Are Choking Freedom Worldwide, by Paul Marshall and Nina Shea.
  • Ross Douthat reviews Margin Call.
  • To Mann, or not to Mann? John Derbyshire responds.
The Long View  .  .  .  .  .  .  .  .  
Athwart  .  .  .  .  .  .  .  .  
Poetry  .  .  .  .  .  .  .  .  
Happy Warrior  .  .  .  .  .  .  .  .  
The Bent Pin  .  .  .  .  .  .  .  .