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December 08, 2003

Argentina: End of Neoliberalism?

Hell is starting to freeze over...or rather the high citadels of international economic orthodoxy are starting to admit that IMF-driven neoliberalism may NOT be the golden blueprint for economic growth.

Good economic news in Argentina is bad news for the free market fanatics.

As Argentina plunged into recession and bank failures, the countries leaders have refused to tow the IMF line. They defaulted on payments to international creditors, refused to let privatized utilities charge what the market would bear, and chose to fund social services for its people rather than pay back rich creditors.

And even the orthodox Economist magazine is admitting that the results are looking good:

the government has focused on boosting domestic consumption at the expense of the demands of foreign creditors, banks, and privatised utilities. This is controversial, but has arguably made economic sense.
Inflation has plunged from 40% down to just a 3% annual rate, unemployment is falling, and growth looks to be 7% for the year.

Of course, the Economist and other corporate types think that some degree of orthodoxy must reassert itself:

But to sustain the recovery, the president needs to make investors confident enough to put their money to work in Argentina. Sooner or later, that will require settling the unfinished business of the past.
But for many people in Latin America, the "unfinished business of the past" are the way failed IMF policies piled their countries with debt and poverty, while making Western banks wealthy.

So Argentina and other Latin American countries standing up to Western creditors may be exactly the route to longterm recovery. With Argentina growing despite its defiance of neoliberal principles, the old orthodox song just doesn't carry the same convincing melody of the past.

Posted by Nathan at December 8, 2003 09:58 PM