Argentina - A social explosion caused by the recession forces out two presidents

Jan/Feb 2002

Years of recession have finally led to what seems to be a violent social explosion in Argentina.

Following the announcement of yet another austerity plan by president de la Rua, on December 13th, which would have resulted in state spending cuts of nearly 20%, a wave of street demonstrations developed across the country. The government responded by declaring a state of emergency, on December 19th, prompting an even more massive mobilisation in the streets. Supermarkets were looted in many towns or forced to organise food distributions among protestors. Running battles with the police lasted throughout the night in the capital Buenos Aires, leaving 29 dead. The next day, economy minister Domingo Cavallo, the initiator of the austerity plan, was forced to resign.

This did not stop the workers' anger. The demonstrations went on. On December 21st, having failed to restore order, president de la Rua himself resigned, two years before the end of his term, followed by his entire government.

However, the interim president appointed by the Argentinian parliament, the Peronist governor Adolfo Rodriguez Saa, was not much more successful. The announcement of his decision to suspend all repayments on the country's foreign debt and to create 250,000 temporary jobs failed to convince the discontented. In the following days, more demonstrators poured into the centre of the capital to demand an end to corruption in the high spheres of government and the state - something that Rodriguez Saa was quite unable and unwilling, to deliver. After just seven days in office, he was left with no choice but to resign as well.

At the time of going to press, another interim president is about to be appointed from the ranks of the Peronist party. But the mobilisation and anger of the working class shows no sign of receding. Indeed the Argentinian working class has many accounts to settle with the politicians and profiteers who have been plundering the country at its expense over the past period.

For the past three years Argentina has been in recession. Unemployment is officially over 16%. Nearly a third of the 37- million population live below the poverty line. However today's difficulties are unfortunately not new. The country has already experienced a number of very tough periods, not just over the past two decades but all along its history.

Half-a-century ago the standard of living in Argentina was comparable to Western Europe. If anything, its present situation is an illustration of the inability of the capitalist system to guarantee balanced economic development. The history of Argentina provides a powerful counter-example against the claim made by the advocates of the capitalist free-for-all, that allowing the capitalist class to get richer without constraints can guarantee economic development, providing everyone with a job and rising standard of living. In fact, the opposite is true.

An economy dependent on imperialism

Argentina ceased to be a Spanish colony in 1810. During its first fifty-years as an independent country, it developed features which it shared with other countries like Australia, Canada and the USA - they were all new countries with a pioneering spirit. But unlike these three countries, Argentina never quite succeeded in getting rid of what it had inherited from its colonial past - dependency and backwardness.

As Lenin remarked more than 80 years ago in his book "Imperialism, the highest stage of capitalism", the imperialist epoch not only creates imperialist powers and colonised countries, but also "diverse forms of dependent countries which, officially, are politically independent, but in fact are enmeshed in the net of financial and diplomatic dependence" - something that Lenin illustrated by using the case of Argentina.

With the total freedom of trade which came with independence, the country's commercial sector and, to a lesser extent, its banking sector, began to develop. This growth became even faster when Argentina was integrated into the world market from the mid-19th century. The European industrialised countries could now afford to import food coming from a country which had huge amounts of land but a limited workforce - specially with the development of technologies allowing large-scale transport and food preservation. Argentina had 12 million acres of fertile land and could offer its wheat, flax, cattle and wool to the entire world.

In return Argentina opened its market to industrial products imported from Europe as well as to the foreign capital required to develop the infrastructure it needed. By 1913, foreign capital accounted for half of invested capital in Argentina, with a third invested in the railways, another third in government bonds and the rest in public services, trade and finance. With 34,000 kilometres of tracks in 1914, the density of the rail network in the Pampa, the central fertile area, was comparable to the USA. But this railway network had been designed to link trading port of Buenos Aires to the rest of the country, without linking the other towns together. Between 1870 and 1930, four million people immigrated to the country, 70% from Spain and Italy.

Between 1910 and 1920, the structure of exports was more or less as follows: 45% wheat and oleaginous crops, 24% meat, 13% wool and 6% leather. These figures were to remain more or less stable for the next 60 years. Argentina's main customers were France, Belgium and, of course, Britain, which also controlled 35% of Argentina's imports.

However the imperialist powers were in no rush to allow Argentina to benefit from their technology. The main obstacle to Argentina's economic development remained its system of land tenure inherited from the colonial days. Despite the expropriation (and massacre) of the Indian natives, which went on until 1880, the land remained in the hands of a tiny class of large landowners whose estates could be as large as 250,000 acres and were usually devoted to cattle, whereas traditional agriculture remained marginal. As a result the farming population remained small - only 24% of the total in 1914. And due to the country's limited industry the immigrant population was forced to survive in Buenos Aires in the small crafts industry. By 1914, the richest 2% of the population received 20% of all income while unemployment reached 20%.

The 1929 depression caused some changes in this situation. It resulted in a large reduction in the country's exports and the drying up of incoming foreign investment. As a result the country's ability to import goods was halved almost overnight. This was to force a limited development of domestic industry. However the industries which were created between 1930 and 1950 were primarily designed to produce import replacements for the consumption of the small privileged class. They were, therefore, confined to areas which did not require too much investment, such as textiles, food, tobacco, leather, light engineering and oil. As to the distribution of income, it remained unchanged.

Europe's difficult economic situation after WWII caused a sharp rise of world prices. This was to allow Peron's regime, which came to power in 1945, to buy social peace by engineering a significant increase in the poor classes' consumption. Thus between 1946 and 1949, the share of wages in the national income increased from 37% to 46%.

The birth of the Peronist CGT

It was during this period that the CGT (General Confederation of Workers), which is still the main asset of the Peronist party, was formed. Peron's regime remained in power from 1945 to 1955. It was a bonapartist regime which based itself on a coalition of forces comprising a section of the army (Peron himself was a senior army officer), the bosses of the big companies and the trade unions. It was a strong regime which was determined to intervene directly in the economy and get rid of Britain's grip over the country. Peron ensured social peace by means of a policy aimed at integrating the trade unions into the machinery of the state and turning class collaboration into an institution. He borrowed some of the features of his regime from Mussolini's corporatist state in Italy but others from the radical nationalist policy of Cardenas, president of Mexico in the late 1930s.

The state which had emerged from the Mexican revolution had chosen to integrate the trade unions into the state machinery in order to have both the army and the working class supporting a policy designed to benefit the Mexican bourgeoisie. At the time Trotsky characterised this type of bonapartist regime as follows: "In countries which are industrially backward, foreign capital plays a decisive role. Hence the relative weakness of the national bourgeoisie compared to the national proletariat. This creates specific conditions for the state. The government must hedge between foreign capital and indigenous capital, between the weak national bourgeoisie and the relatively powerful proletariat. This gives the government a particular in-built bonapartist character. It rises, so to speak, above the classes. In reality it can choose to rule either by being the instrument of foreign capital and maintaining the proletariat in the chains of a military dictatorship, or it can manoeuvre with the proletariat, going as far as making some concessions for its benefit, and gain as a result a certain freedom with regard to foreign capital."

In Argentina, Peron attracted the support of the proletariat as well as that of the industrial bourgeoisie, which was all too pleased to free itself from Britain's control. Peron addressed the proletariat using a radical demagogic language which referred to a "social revolution": "I intend to improve the standard of living and to protect all workers, even the poorest, from capitalist exploitation." This rhetoric was combined with a nationalist language: "We are sowing the seeds which will allow the blossoming of a free motherland which will not bargain its sovereignty."

But when Peron addressed the bosses, he spelt out his intentions: "It is a serious mistake to believe that workers' trade- unionism is detrimental to the employer. On the contrary, it is the best framework to help the employer to avoid having to fight with his workers." And he added: "It has been said that I am an enemy of capitalism. However, you will never find someone who is, let us say, more determined, to defend capitalism: because I know that to defend the interests of businessmen, industrialists and traders amounts to defending the interests of the state itself."

The exceptionally favourable situation enjoyed by Argentina in the aftermath of WWII allowed Peron to win the support of the working masses thanks to a policy which ensured a relatively high level of wages. A symbol of this policy was the granting of a 13th month of wages - the memory of which still remains today among the working class. The CGT became an institution of the state. The surplus of foreign currencies which, until 1947, allowed the state to improve workers' standard of living was also used to finance the development of a fully-fledged trade-union bureaucracy. Those workers who opposed the new regime, for instance those who supported the Communist Party, were banned from attending trade-union AGMs or even branch meetings. From 1946 to 1949, hundreds of industrial disputes were declared illegal and repressed. Militant branches were disbanded. The CGT had no qualms over recruiting thugs in order to attack strikers. Trade-union activists who had refused to join the CGT were tortured or murdered. Jails filled up with militant workers who had been denounced by the CGT.

The policy of the union bureaucracy

In 1955, another member of the military, general Lonardi, staged a coup, overthrowing Peron. Lonardi had the support of US imperialism which did not appreciate Peron's independence. The CGT turned itself into a more federal machinery which brought together various currents: the Peronists remained the dominant force with 62 organisations, the communist party (10 organisations) and 12 other anti-Peronist organisations. Following Peron's overthrow, his political party (the Justicialist party) was banned. And for the following twenty years, the Peronist opposition used the CGT as its main voice.

The CGT leaders competed to win Peron's support while he was in exile. This was primarily a matter of self-interest on their part. Indeed Peron remained a living myth among the Argentinian working class and whoever could claim his support was assured of a certain authority.

The Peronist movement remained as a considerable political force and all the military dictators and elected presidents who alternated in power between 1955 and 1973 had no choice but to take it into account.

After the 1960s, industrialisation spread to new areas: chemicals, heavy engineering and metal and car manufacturing developed at an annual 8.6% rate during this period. But most of the investment came from abroad: 97% in car manufacturing, 70% in electronics. Above all agriculture still provided the largest single source of income despite its antiquated methods: in 1960 the amount of fertilizer used per acre was only 1% of that used in the USA! As to the rural population, it fell from 29% of the total in 1949 to 20% in the 1970s.

However, most of the wealth remained in the hands of the same ruling layers. The 5% richest had a standard of living comparable to the richest industrialised countries. By contrast, the sum total of wages, which had increased under Peron, began to decrease after him. Productivity increased faster than real wages. And due to the industrial concentration in the province of Buenos Aires, there were large differences between the capital and provincial towns. In 1963, the country's provinces accounted for 75% of the total surface and 33% of the total population, but produced only 20% of the wealth. Wages were sometimes 60% lower in provincial towns than in the capital.

Trade remained in deficit. Argentina's share of world agricultural exports shrunk from 3% in 1928 to 0.4% in 1980. However, over the following twenty years, agricultural productivity doubled. This allowed agriculture to recover its previous level of activity, but at the price of considerable exploitation. The distribution of the land, however, remained unchanged. In the 1990s, it was estimated that only 1.3% of the estates comprising more than 12,000 acres, covered as much as 47% of the toiled acreage. By contrast the farms comprising less than 60 acres (41% of all estates) covered only 1% of the toiled land!

Between 1950 and 1963, exports were unable to provide the income necessary to cover the imports required by industrial growth. Due to the country's late industrialisation, machinery could only be bought locally at a high price. When these prices reached a certain level, it made foreign companies more profitable. At that point they invested in the country, bought local companies and imposed monopoly prices, thereby preventing prices from going down.

This was how, from 1959 to 1969, many companies linked to foreign multinationals settled in Argentina. By 1969, these companies represented almost 80% of all industrial capital in the country. The various governments which were in office between Peron's downfall (1955) and Videla's military coup (1976) all claimed to defend the interests of the national economy. But they proved no more prepared to confront the large foreign companies than to reduce the share of the wealth appropriated by the local capitalists.

Breaking up the state economy

In 1969, a working class uprising in Cordoba marked the beginning of a period of mass radicalisation which caused the Argentinian capitalists to bring Peron back into office.

However, the purpose of the exercise was no longer to concede a few crumbs to the working class in order to win its support. Peron was expected to allay workers' suspicions and demoralise them with the help of the CGT machinery. From 1973 to 1976, when workers' militancy remained high, the policy of the CGT bureaucracy was identical to that of the right and extreme-right of the Peronist movement. The outcome of this second interlude of Peronism was a military coup followed by the worst period of dictatorship ever in Argentina, under General Videla, and later General Galtieri. It lasted between 1976 and 1983. The dictatorship left deep scars in the country. This is illustrated by the movement of the women of the "Plazo de Mayo", mainly mothers of "disappeared" activists, who had the courage to stage public protests during the dictatorship and still carry on today, in order to demand the whole truth about the fate of their missing sons or daughters. Despite the politicians' efforts - both Radicals and Peronists - to protect the army cadres from being brought to the dock, loopholes in the justice system have at least made it possible to get dozens of leading figures in the military junta to be put under house arrest. The human cost of the dictatorship was particularly heavy, with 30,000 "missing" activists, including many rank-and-file Peronists. But its economic cost was just as heavy.

Indeed Videla's military junta began to dismantle the state's economic machinery under the pretext of creating a "free market", disbanding state monopolies over meat and wheat, transferring the responsibility for exports to the private sector and increasing state subsidies to agriculture (i.e. to the big land owners). The removal of import tariffs increased the difficulties experienced by local industries. At the same time, due to the fall in real wages, consumption of manufacturing products went down. For instance, car sales dropped by nearly a third. Productive investment fell while more capital went towards financial speculation.

The military regime managed to make up, to an extent, for this, by developing the finance and banking sector. However the wage freeze it declared failed to stop inflation. Cutting the government budget deficit only resulted in slowing down the economy. By 1977, the purchasing power of the population had dropped by 60% compared with 1974. Once again the share of the economic surplus appropriated by the big land owners increased while industrial capitalists maintained their profits by reducing wages.

By the time the Radical president Raul Alfonsin was elected, at the end of the long period of dictatorship, in 1983, the economic situation was marked by massive inflation, a deep recession and a colossal foreign debt.

Alfonsin took a series of economic measures, with the backing of the IMF, which came to be known collectively as the "Austral plan". To no avail. From 1984, all the country's surplus was used to repay its foreign debt. But this was not even enough to prevent this debt from increasing by almost 50%. During the same period, the Argentinian currency was reduced to one fiftieth of its value compared to the US dollar. Interest rates were so high that productive investment fell even further. By 1989, industrial production was lower than in 1974 and the share of wages in the national income had dropped to 28%, compared with an average 35% since 1945. Unemployment had already reached 15%.

The privatisation of the public sector

When the Peronist Carlos Menem was elected president in July 1989, there were 9 million poor out of the country's 30 million population. He immediately stepped up the moves to privatise public companies. At the same time Menem launched a systematic policy of deregulation. The national boards which controlled markets for wheat, meat and wine were disbanded. Export activities got a privileged treatment. In the social sphere, the state withdrew from all wage bargaining while imposing flexible working hours, thereby putting into question concessions which had been made under the first Peronist government.

In reality, the state had let down its own companies a long time before by failing to invest in machinery and infrastructure - this was particularly true of the railways with the total mileage of tracks falling by nearly 25% over the previous period.

The privatisations resulted in the richest getting even richer, while causing a large number of casualties, both in terms of redundancies and of closures of productive facilities. A year later, unemployment began to increase again. Whole social layers were sliding into poverty - pensioners, primary school teachers, state functionaries.

However, the economy minister Domingo Cavallo (a former president of the Central Bank under the dictatorship) managed to slow down hyper-inflation (which fell from 4,933% a year in 1989 down to "only" 1,355% in 1990) by establishing the free convertibility of the Argentinian currency (then called the austral, before becoming the peso again, in January 1992) at a fixed rate of one austral to the dollar. This success allowed Menem to win his re-election. However, during Menem's second term, the economy and indebtedness of the country were to deteriorate even further.

Ministers change but austerity remains

In 1999, Ferdinand de la Rua, another Radical, was elected president. During the two years of his term, he was to have three economy ministers. But each time a new austerity plan replaced the previous one. The wages of state employees were first cut by between 8 and 24% and then by another 13%. This second wage cut was extended to 2.5 m pensioners whose pension was over 300 pesos (around £200) per month.

But these plans never managed to loosen the noose which strangled the economy. By the end of 2001, the foreign debt had tripled and the public debt was reaching $132bn, or half of the country's GDP. The economy is now entirely dependent on the loans of the world's bankers. The only rational measure which could have been envisaged was to suspend all debt repayments. However, being much to respectful of the interests of foreign and national capitalists, de la Rua did not have the political will to take such drastic action.

The shape of industry is just as bad. The economic recession is so deep that it results in the destruction of productive capital. Industry operates at half its capacity. Over the past year, the car industry only produced 180,000 vehicles compared with an 850,000 capacity. As a result, out of the 400 car component companies, 20 have closed down and 80 have left the country. In engineering and textiles, production has dropped by 20% in just one month. A study on competitiveness published by Harvard university ranks Argentina in 75th position, compared to its previous 53rd ranking. The study points at Argentina's lack of innovation in technology. But it forgets to mention that the multinationals operating in the country only brought in technologies which were already outdated in the industrialised heartlands.

Working class' anger

The fall in industrial activity feeds unemployment. Since November 2000, there has been an endless series of demonstrations by the jobless, blocking the streets with pickets in order to put their case across. This militant activity of the unemployed is supported by many youth, far-left and trade-union activists, but also by the Catholic church. Hunger marches have also been organised.

These radical struggles follow the series of uprisings and fights which marked the 1990s, mostly among the unemployed, temporary workers and public sector employees of provincial towns who were worst affected by Menem's attacks.

The first uprising took place in 1993, in Santiago de Estero (in the North of the country) where state employees attacked a public building to protest against the failure to pay their wages for three months. Between 1995 and 1997, similar uprisings together with roadblocks took place in the provinces of Jujuy, San Juan, Rio Negro, Neuquen and Salta, among others. In some cases demonstrators were killed. Dozens of activists were arrested. Over the past month the police issued warrants against 1,800 activists.

Menem's attacks during this period generated considerable opposition within the ranks of the CGT, splitting the Peronist- dominated confederation into three distinct trade-union confederations - two retaining the name CGT and another called CTA.

The CTA, which is led by Victor de Gennaro, is the smallest confederation. It is also most affected by the attacks against public workers, since its main organisations are the Association of State Employees (ATE) and the Union of Public Sector Teachers (CTERA). It presents itself as being free of any political ties. But in fact it is close to Frepaso, a small centre-left party which became part of the subsequent coalition government under de la Rua.

One wing of the CGT is led by Rodolfo Daer. It is formed by the section of the CGT bureaucracy which sought to retain its privileges by agreeing to Menem's demands. The other CGT, led by Hugo Moyano, includes the Union of Tramway Workers (UTA) and the truck drivers' union. It expresses most closely the point of view of those workers who opposed Menem's attacks.

Throughout the summer of 2001, the unemployed staged days of action across the country and tried to set up a national movement. But the fate of the unemployed does not depend only on their radicalism. It depends to a large extent on the employed workers, who to retain the means to exercise an effective pressure on the capitalist class.

The three trade-union confederations represent a considerable force. In the recent demonstrations against austerity, they mobilised far more people in the streets than the demonstrations organised by the jobless. However the reluctance of the two CGT leaderships to create the conditions for their troops to join ranks with the unemployed reflects their refusal to offer the perspective that the working class needs.

Over the past two years, the Peronists have been in opposition, following the election of de la Rua. As a result the two CGTs found some common ground in opposing the government. They exposed the "power vacuum" but were cautious not to take the risk of allowing the working class to fill this vacuum.

However, as the social explosion which began last month shows, the workers' discontent is very deep and many workers are conscious that they need a real fighting programme which can provide working class as a whole, those in full or partial employed as well as the jobless, with a common answer to the present situation. For this to happen, these workers must understand that the bourgeois parties, whether Peronist or otherwise, have nothing to offer them. They must also learn to distinguish those who are their true allies among the Catholic hierarchy, the politicians and the trade union bureaucrats who pretend to be concerned with the situation of the poor.

A way forward is not easy to find but the will to fight is there. However, only a united fight bringing together all sections of the Argentinian working class will allow it to shake off the burden of the state's public debt and the predatory greed of the Argentinian capitalists.

2 January 2002