The roots of inflation in Argentina: debt, plunder, and capitalist super-profits

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Following is the text of a speech given by María Álvarez of the Partido Socialismo y Libertad in Argentina at a Seattle forum sponsored by Radical Women and the Freedom Socialist Party on Dec. 9, 2022.

The increase in the cost of living is a major problem for workers everywhere, including here in the United States, where the rate of inflation has recently topped 8 percent. In Argentina, no worker’s wages can keep up with the cost of living — the annual hyperinflation rate is over 100 percent.

This is not the first time that my country has faced uncontrolled inflation. Every worker in Argentina knows that the current rate of inflation is the direct result of government policies that fund public spending for social services such as healthcare, education, and pensions at increments much lower than the inflation rate.

Even so, this is not the main cause of rising prices. The root cause is interest payments on the National Debt that is owed to the International Monetary Fund and to other international creditors. Added to these burdensome payments are the super-profits in dollars that the imperialist multinationals bleed out of the country. Large-scale Argentinian capitalists and industrialists also engage in capital flight by investing abroad.

This massive drain of foreign currency has thrown Argentina into bankruptcy. The National Treasury and the Central Bank have no money and, in effect, are bankrupt. To meet expenses, the government prints billions of Argentinian peso notes. This national currency loses its value from one day to the next because no material wealth exists to sustain its value.

This situation is not new. It did not begin with the current Peronist government of President Alberto Fernández, which touts itself as progressive. Neither did it begin with the previous center-rightwing government of former President Macri. The poverty and misery that define the lives of almost half the population today is the product of a continuous economic model. This is a model that was first imposed by a policy of blood and fire during the military dictatorship that ruled Argentina from 1976 to 1983. This dictatorship kidnapped and disappeared thirty thousand opponents, most of whom were working-class activists and students.

The military government contracted loans for 46 billion dollars. Half of this $46 billion loan was directly transferred into the pockets of Big Businesses. Instead of demanding repayment, the government turned around and assumed responsibility for repaying these loans. This amounted to a big subsidy for Big Business.

This is how the country was first saddled with an enormous debt it could never pay. Since then, successive elected governments have contracted increased amounts of debt to pay the interest on the 46-billion-dollar original debt. Today, Argentina’s debt stands at 378.5 billion dollars. What’s more, capital flight by Argentinian capitalists amounts to 400 billion dollars.

Meanwhile, the Central Bank in Argentina has only 3.5 billion dollars in government reserves and a debt in pesos with local banks to the tune of 57 billion dollars. These 57 billion dollars of government debt is burdened with an annual interest rate of 107 percent. This shows how financial capital’s exploitation and speculation abroad is bankrupting Argentina. This amounts to a criminal, full-scale looting of the country’s human and natural resources.

The so-called fiscal deficit caused by interest payments, along with remittances sent by multinationals to their home countries and capital flight, is the real cause of structural inflation in Argentina.

As the inflationary spiral continues upward, the value of dollars increases as they become increasingly scarce. All this leads to the devaluation of the local currency, the Argentinian peso. As the government prints more and more currency and as the value of the Argentine peso is devalued by hyperinflation, the purchasing power of workers’ wages decline.

Businesses increase the prices of their products according to the value of the dollar, but they pay salaries in increasingly devalued pesos. In this way, they increase productivity while reducing labor costs. This creates extraordinary profits.

Those who benefit the most from this plunder and exploitation are the banking corporations and multinational companies, which dominate the economy and are the main creditors. These enterprises are the main entities profiting from Argentina’s burden of debt.

In this way, Argentina is a clear example of how imperialist capitalism wreaks ruin in its semi-colonies by throwing the working class and the people into misery and poverty.

Argentina is a country that has the capacity to produce food to supply the peoples of the entire South American continent. Yet it is facing still yet another situation of economic bankruptcy and an unprecedented social crisis. Today a government supported by the capitalist opposition parties and a trade union bureaucracy rule Argentina. This Peronist government has handed over the management of the economy to the International Monetary Fund.

It is worth noting that 50 years ago, the United States and Canada were the only countries in our hemisphere where workers had better living conditions than in Argentina.

There have been four consecutive years of wage losses brought on by inflation and IMF “adjustments” agreed to by the government. As a result, huge numbers of Argentinians have become newly poor and destitute.

Wages and pensions, measured in dollars, have plunged by 70 percent. Those who suffer the most from the economic catastrophe belong to the most vulnerable groups. Sixty percent of children and a majority of retirees in Argentina live below the poverty line.

Government policies are designed to overcome the bankruptcy of the Argentinian capitalist state by making the working class and the majority of the population pay for the crisis created not by them, but by imperialism and the ownership class in Argentina. In the face of this, the working class and the popular sectors of my country are being forced to resolve their most pressing needs by direct action. That is to say, through mass mobilizations and strikes that combine the demands of the oppressed and exploited.

For example, in 2020 during the Covid pandemic, essential workers in healthcare, transportation and the food industry participated in 250 union job actions involving 253,000 strikers.

In 2021, the following year, there were 740 union conflicts among industrial and public sector workers. These actions involved 980,000 strikers. So far this year, the number of job actions has almost doubled over the previous year. These job actions have been joined by protests by hundreds of thousands of unemployed people. Actions have also taken place against multinational corporations involved in mining and oil production. There has been growth in the movements against violence against women and children and against the deterioration and destruction of public services such as electricity, transportation, water, gas, housing, and more. There has also been protest against the insecurity caused by increases in street crime and organized drug and human trafficking.

The reality is that it is not possible to put an end to inflation without attacking its causes: These causes are financial exploitation and plundering by transnational corporations and banks.

There is no way to meet the most pressing demands of working people without canceling the fraudulent public debt and breaking the government’s agreements with the IMF and imperialism.

In Argentina and around the world, the working class must fight for an alternative workers’ program that begins by demanding this elementary measure — canceling the debt — together with other measures that correspond to the needs of the majority.

There needs to be an economic program to benefit the most downtrodden. This can only be achieved under a workers’ popular government that puts an end to inequality and the oppression of the parasitic minority that lives and grows rich thanks to wage exploitation.

To sum it up, we need a government of the exploited and oppressed, one capable of beginning the construction of a free and egalitarian society — a socialist society.

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