The Cost of Perónism and Populist Coups Tough Lessons from Argentina
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DISCUSSION PAPER 5/2018 The Cost of Perónism and Populist Coups Tough Lessons from Argentina Greg Mills Strengthening Africa’s economic performance The Cost of Perónism and Populist Coups Tough Lessons from Argentina Contents Executive Summary .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 3 Introduction .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4 The Advent of Perónism .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4 The Foreign Policy Link .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 6 A Perónist Aberration? .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 7 Cyclical Collapse .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 8 Onto the Kirchners.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 9 Undoing the Perónist legacy? .. .. .. .. .. .. .. .. .. .. .. .. 12 Endnotes .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 13 About the Author Published in May 2018 by Dr Greg Mills heads the Johannesburg-based Brenthurst Foundation, The Brenthurst Foundation established in 2005 by the Oppenheimer family to strengthen African eco- nomic performance. He holds degrees from the Universities of Cape Town and Lancaster, and was the National Director of the SA Institute of International E Oppenheimer & Son (Pty) Ltd Affairs from 1996 to 2005. He has directed numerous reform projects in more PO Box 61631, Johannesburg 2000, than a dozen African governments (including in 2017 for example with the South Africa governments of Ghana, Lagos State, the five states of SE Nigeria, Lesotho Tel +27–(0)11 274–2096 and Mozambique), sat on the Danish Africa Commission and on the African Development Bank’s high-level panel on fragile states, and has served four Fax +27–(0)11 274–2097 deployments to Afghanistan with NATO. A member of the advisory board of www.thebrenthurstfoundation.org the Royal United Services Institute, he is the author, inter alia, of the best- selling books Why Africa Is Poor, Africa’s Third Liberation (with Jeffrey Herbst), All rights reserved. The material and most recently, together with the chairman of the Foundation, President in this publication may not be Olusegun Obasanjo, Dr Herbst and Major-General Dickie Davis, Making Africa reproduced, stored, or transmitted Work: A Handbook for Economic Success. He is currently working on a book- without the prior permission of the length study entitled Making Democracy Work due out at the start of 2019. publisher. Short extracts may be quoted, provided the source is fully acknowledged. Layout and design by Sheaf Publishing, Benoni. THE COST OF PERÓNISM AND POPULIST COUPS Executive Summary In May 2018 Argentina has gone cap-in-hand to the IMF for a US$30 billion loan to shore up the peso, after a rise in interest rates to 40 per cent failed to stop the markets selling off the currency. The country’s financial problems started long before the current, pro-market government of Mauricio Macri. Argentina was once in the top-six largest economies worldwide. Since then, a combination of bad policies, big egos and a craving for control have systemically ensured macro-economic instability laced by corruption, undermining productivity, spurring inflation, weakening growth, and damaging already weak institutions. In Argentina, populist politics has routinely trumped common sense economics. This Brenthurst Discussion Paper evaluates the history of populism and politics trumping economic common sense and the prospects of President Macri in putting this right. The question is: Will Argentinians let him? BRENTHURST DISCUSSION PAPER 5/2018 3 THE COST OF PERÓNISM AND POPULIST COUPS Introduction of the Great Depression, leading to a 70 per cent fall in traditional commodity prices, compound- La Recoleta cemetery is perhaps best known as ing the legacy of the First World War, which had the final resting place of Eva Perón, the former resulted in a deep cut to GDP and bottlenecks in first lady of Argentina, who died in July 1952. She production as links with the outside world were had become the face of Perónism, a crusader broken. for women’s rights and champion of the poor, Still, by the end of the Second World War, the ‘Spiritual Leader of the Nation’. Argentina had enjoyed a higher rate of growth The epitome of a national drama, today Evita is and lower inflation than the United States, ran low immortalised by the eponymous opera.1 deficits, maintained a traditional monetary sys- The cemetery sits in an upmarket Buenos Aires tem, and possessed an institutional make-up akin suburb. She rests among presidents, Nobel lau- to a developed country of the time. Argentina was reates, a granddaughter of Napoleon, Generals, one of the most successful emerging economies Admirals, boxer Luis Ángel Firpo, the ‘Wild Bull of of this ‘Golden Age’, benefitting from a bounty of the Pampas’ who knocked Jack Dempsey through natural resources and the human capital of rapid the ropes in a world title fight in 1923, who enjoys a immigration. life-size bronze statue alongside his marble tomb, This soon gave way, however, after 1945 to a along with one or two lesser known names in more populist political-economy, characterised Argentine society, including the political scientist by international isolation, state intervention, high Guillermo O’Donnell.2 import duties, export taxes, rent-seeking, high inflation, falling productivity including in agricul- ture, and the weakening of democratic institutions – tendencies which were amplified by episodic mil- itary governments. Per capita income in Argentina between 1975 and 1990, for example, fell by 1.5 per cent per annum, while the world rate expanded at 1.6 per cent.4 A victim of its own, self-imposed Cold War, Argentina had largely failed, by 1990, to globalise. The Advent of Perónism O’Donnell coined the phrase Bureaucratic Authoritarianism in describing the form of Latin The second coup, the Revolution of ‘43, signalled American military rule in the 1960s and 1970s a change that has since shaped Argentine politics in being based on modern technocrats and a and economics whatever the regime type, civilian professionalised military organisation. It is easy or military. The dictatorship ended with demo- to forget the influence of the military in Latin cratic elections in February 1946, won by Colonel America when, today, there are no juntas. But Juan Perón, who had served in several government in the 1980s, eight of ten regional countries had positions in the preceding three years, includ- military regimes. In Argentina, there were six suc- ing as the Minister of War and of Labour, and as cessful coups between 1930 and 1976, the military Vice President. After 1946 he continued where the ruling for around a quarter of the 20th century junta had left off, though with a ‘corporatist’ strat- before their role in politics along with their pres- egy, focused on drawing the political and working tige, power and influence came to a sudden end classes closer together through mobilisation of the with their defeat in the 1982 Malvinas war.3 unions, and adopting a radical import substitution The first, led by General José Félix Uriburu in industrialisation (ISI) and redistributive policy. September 1930, came in the wake of the instability BRENTHURST DISCUSSION PAPER 5/2018 4 THE COST OF PERÓNISM AND POPULIST COUPS Although further coups followed in 1955, 1930 and 1945 had created a vested interest in 1962, 1966 and 1976, interspersed with periods protectionism. As Ricardo López Murphy, a for- of civilian government, the populism of Perón mer Minister of Economy and of Defence, puts it, perpetuated through all these regimes. As the ‘Argentina replaced the invisible hand of the state journalist Rosendo Fraga notes, ‘It is difficult to with the heavy finger of Perónism’. define Perónism. We have had six military coups The Puma and the Tigers since 1930, but Perón won three elections, despite 40 000 being a military person, and suffered a military 35 000 coup [in 1956]. Perónism,’ he concludes, ‘is all of 30 000 a party, movement, culture, ideology and doctrine, 25 000 the extreme manifestation of a general phenom- 20 000 enon in Argentina of weak institutions and strong 15 000 10 000 personalities, where power is more important than 5 000 ideology.’ 0 Perón observed that ‘You should indicate left, but turn right.’ This lesson has been applied, how- 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Latin America Four Asian Argentina ever, only partly in the 44 years that Perónism has & Caribbean Tigers ensued after Juan’s death. Perónist governments have habitually indicated left and turned that way, This drew from an ideological cocktail of at great cost to financial and political stability. Still ‘Keynesian policies and [the dependency theory of Perónism has retained its stature as a ‘hegemonic’ Raul] Prebisch,’ says López Murphy, ‘of the need for party. state interventionism in industry to offset the belief Between 1946 and 2018 Perónist candidates that while the cost of commodities fell the price of have won nine of the 12 presidential elections in manufactured goods would rise.’ The reality has which they were allowed to participate, encom- since, however, proven completely inverse to this the- passing the periods of Juan and Isabelita Perón ory, though this structuralist argument has informed (1946–55 and 1974–76) and, more recently the hus- a generation