Globalisation and State Power: Political and Economic Reform Argentina, 1989-1995 Nicola Jane Phillips Thesis submitted for the degree of Doctor of Philosophy London School of Economics and Political Science University of London UMI Number: U113661 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U113661 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 75 72 701562 Abstract The thesis examines the process by which sustained reform became possible in Argentina between 1989 and 1995 after some fifty years of cyclical crisis and ungovernability. It argues that the first administration of Carlos Menem broke the earlier ‘logic’ of Argentine politics, characterised by the suffocation of economic policy coherence by organised political interests. What needs to be explained, in this light, is not why reform happened in Argentina (- this is explained readily with reference to the crisis of 1989), but rather how it wassustained. The central contention is that the consolidation of reform can be explained convincingly with reference to international influences from around 1991/2 onwards. These influences are identified as (a) globalisation, (b) conditionality, and (c) regionalisation. In this way, the theoretical agenda of the thesis feeds into the study of International Political Economy and the prevalent debates in the study of globalisation. The international influences on change at the domestic level worked in two ways. First, they acted to ‘rescue’ the Argentine state from its conditions of crisis in the late 1980s by providing the political and economic space for a radical reform of both the economy and society. Second, the consolidation of this restructuring process was achieved from 1991/2 onwards through the ‘internationalisation’ of the state, which led to significant changes in the nature of state power. The impact of the three dimensions of international influence generated a ‘paradox of state power’, in which the state became simultaneously more and less ‘powerful’: while its autonomy diminished in the international context in terms of the available policy options, there was a marked increase in its autonomy in the internal arena vis-a-vis domestic political and economic actors. The result was an opportunity for the consolidation of the government’s political and economic reform agenda in Argentina. 1 Acknowledgements This PhD was produced according to the ‘big-bang’ theory of thesis-writing. My supervisors, Professor James Mayall and Dr George Philip, patiently waited for the clap of thunder and their comments and support throughout the process have been invaluable. Financial assistance from the Suntory-Toyota Centre for Economics and Related Disciplines (STICERD) at the LSE and the University of London Central Research Fund is gratefully acknowledged. The bulk of the primary research was conducted in Argentina. It would be impossible to mention individually the enormous number of people in Buenos Aires to whom I owe thanks. The list of interviewees at the end of the thesis is intended as an acknowledgement of their generously-afforded time and assistance. During both visits I was based at the Facultad Latinoamericana de Ciencias Sociales (FLACSO), where I was given desk space and a stimulating environment in which to work. The librarian, Teresa, endured having me under her feet and rifling through boxes in the most obscure comers of her collection. Likewise, Stella Maris Zoppi at the library of the Economy Ministry was astonishingly good at identifying exactly what I was looking for when I myself had absolutely no idea. The officials of the Joint Parliamentary Commission of the Mercosur, especially Oscar Casales, were more than generous with their time and information. Special thanks are due to a number of friends and colleagues that helped to make both visits to Buenos Aires both successful and fun: Dr Gabriel Casaburi, Valentina Delich, Francisco Diez, Myriam Felperin, Andres Fontana, Paula Gosis, Ana Miura, Jesus Rodriguez, Margarita Solari, Fernanda Tuozzo and Carlos Vassallo. Most of all, Dr Diana Tussie of FLACSO was a constant inspiration of both ideas and enthusiasm, and her influence on the shape of this thesis is huge. My colleagues at the University of Warwick have been supportive throughout the final stages of preparing the thesis, and Professor Richard Higgott did a great job with the red pen on a couple of sections of the final draft. My friends, particularly Sophie Heppel and Andrea Thorpe, kept the whole project in perspective and kept me going. By far my greatest appreciation is reserved for my parents, Susan and Vivian Phillips. They have responded stoically to many hours of agonised telephone calls with many hours of patient encouragement. Their belief in me, in this and other respects, has meant more to me than they can imagine. This thesis is dedicated to them, with my love and sincerest thanks. 2 Table of Contents Abstract 1 Acknowledgements 2 List of Tables and Figures 6 List of Acronyms and Abbreviations 7 1. Introduction 10 The Shortcomings of the Literature and the Contribution of the Thesis 14 The Concept of Globalisation 23 The Three Dimensions of International Influence 27 The Study of the State and Conceptions of State Power 30 The Organisation of the Thesis 35 2. Cycles of Crisis and Reform in Argentina 37 Peronism to the Dirty War: Crisis and Instability 39 The Collapse of the Peronist Experiment in the 1950s 39 Crisis in Early 1960s 45 Ongania, the 1966/7 Crisis, and the Revival of Peronism 49 Military Dictatorship, 1976-82 54 The Alfonsln Administration and the Economic Crisis of 1988-9 57 Patterns of Crisis and Reform in Argentina 63 Conclusion 66 3. ‘Surgery Without Anaesthetic’: Economic Reform under Menem 68 1989-91: Implementation of Reform and Resurgence of Hyperinflation 70 1991-95: Consolidation of Neoliberal Reform 75 The Convertibility Plan 76 Trade Reform and Economic Liberalisation 77 The Foreign Investment Regime and the Privatisation Process 81 Foreign Debt and the Brady Plan Agreement 87 3 The Exhaustion of the Neoliberal Revolution? 88 Conclusion 91 4. Depoliticising Argentina?: Power Structures and Political Reform 93 Interests in Argentine Society and the Decline of Corporatism 94 The Disempowerment of Veto Powers: Labour and the Military 96 Labour and the Trade Unions 96 The Armed Forces 102 The Incorporation of Interests: Business and the Technocrats 110 Business 110 The T echnocrats 116 ‘Government by Decree’ and the Weakening of Institutions 118 Executive-Congressional Relations 119 The Supreme Court of Justice and the Judiciary 124 Conclusion 125 5. Globalisation and State Power 128 Globalisation and the State 132 The State: Obsolescence and Retreat 133 The Argument for a Re-Conceptualisation 136 The Paradox of State Power 143 Financial Globalisation and the Advantages of Conformity 143 The ‘Competition State’ 147 Globalisation, Reform and the ‘Rescue’ of the Argentine State 150 Globalisation and Political Reform 155 Conclusion 159 6. Globalisation and Conditionality 161 Dimensions of the Globalisation-Conditionality Nexus 163 The Changing Nature of Conditionality: The Concept of Governance167 Argentina and Conditionality 173 4 Argentina and the International Monetary Fund 176 The 1992 Extended Fund Facility Agreement 179 The 1995 ‘Rescue’ Package 182 Conditionality and Argentine Economic Reform 185 Governance, State Power and Political Reform 188 Conclusion 196 7. Regional Integration, State Power and Reform 198 Globalisation, Regionalisation and the State 202 Regional Integration and Policy Change in Argentina 208 The Regional ‘Rescue’ of the Argentine State 213 Regionalism, State Power and Societal Interests 217 States, Governments and Institutions 217 Actors and Participation in the Integration Process 221 Mercosur and Intergovemmentalist Theories of Integration 224 Regionalism, Democratisation and the Military 232 Conclusion 234 8. Conclusions and Perspectives 237 The Argument 237 The Contribution to the Study of Argentina 241 The Contribution to the Study of IPE 243 The ‘Depoliticisation of the State’ Debate 245 Future Directions: The Disempowerment of Politics? 249 The ‘Marginalisation’ of Argentine Democracy? 249 Globalisation as ‘Politics without Outcomes’? 254 Appendix: List of Interviewees 256 Bibliography 260 5 List of Tables and Figures Table 2.1 Percentage Change of Real GDP and Consumer Prices 1946-89 38 Table 3.1 Percentage Change of Real GDP and Consumer Prices, 1988-95 69 Table 3.2 Import Tariff Reform, 1989-1991 78 Table 3.3 Net Direct Foreign Investment to Argentina, 1990-1995 82 Table 3.4 Principal Privatisations in Argentina, 1989-1995 84 Table 3.5 Total Disbursed External Debt 88 Table 7.1 Mercosur Trade 201 Table 7.2 Evolution of the Structure of Mercosur Exports to the World 202 Table 7.3 Mercosur: Timetable for Tariff Reductions 210 Figure 7.4 Institutional Structure of Mercosur 220 Figure 8.1 Politicised Economic Management in Argentina 247 Figure 8.2 Depoliticised Economic Management