Middlesex University Research Repository An open access repository of Middlesex University research http://eprints.mdx.ac.uk Cantamutto, Francisco J. and Ozarow, Daniel ORCID: https://orcid.org/0000-0001-6695-9984 (2016) Serial payers, serial losers? The political economy of Argentina’s public debt. Economy and Society, 45 (1) . pp. 123-147. ISSN 0308-5147 [Article] (doi:10.1080/03085147.2016.1161118) Published version (with publisher’s formatting) This version is available at: https://eprints.mdx.ac.uk/19428/ Copyright: Middlesex University Research Repository makes the University’s research available electronically. Copyright and moral rights to this work are retained by the author and/or other copyright owners unless otherwise stated. The work is supplied on the understanding that any use for commercial gain is strictly forbidden. A copy may be downloaded for personal, non-commercial, research or study without prior permission and without charge. 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See also repository copyright: re-use policy: http://eprints.mdx.ac.uk/policies.html#copy Economy and Society ISSN: 0308-5147 (Print) 1469-5766 (Online) Journal homepage: http://www.tandfonline.com/loi/reso20 Serial payers, serial losers? The political economy of Argentina’s public debt Francisco J. Cantamutto & Daniel Ozarow To cite this article: Francisco J. Cantamutto & Daniel Ozarow (2016): Serial payers, serial losers? The political economy of Argentina’s public debt, Economy and Society, DOI: 10.1080/03085147.2016.1161118 To link to this article: http://dx.doi.org/10.1080/03085147.2016.1161118 © 2016 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group Published online: 19 Apr 2016. Submit your article to this journal View related articles View Crossmark data Full Terms & Conditions of access and use can be found at http://www.tandfonline.com/action/journalInformation?journalCode=reso20 Download by: [Middlesex University] Date: 19 April 2016, At: 07:28 Economy and Society http://dx.doi.org/10.1080/03085147.2016.1161118 Comment and Critique Serial payers, serial losers? The political economy of Argentina’s public debt Francisco J. Cantamutto and Daniel Ozarow Abstract A global neoliberal architecture has enabled many countries to increase their public debts to meet their fiscal needs. But since 2008 a number of European and North American economies have faced financial crises induced by unsustain- able debts. This paper analyses the case of post-default Argentina since 2001, so as to better comprehend the political economy of public debt, especially in cases where governments are elected on anti-austerity platforms. Presidents Néstor and Cristina Kirchner were committed to a debt-reduction policy, yet Argentina faced a new, ‘selective’, default in 2014. This paper analyses how the country has been trapped in a cycle of debt dependency, which can only be interrupted by a comprehensive audit of the debt’s legitimacy followed by debt cancellation. Criti- cal lessons are provided for other countries facing similar situations. Keywords: Argentina; public debt; external debt; neoliberalism; default; vulture funds. Downloaded by [Middlesex University] at 07:28 19 April 2016 Once confined to non-industrialized economies in Africa, Southern Asia and Latin America, today, in the post-global financial crisis milieu, sovereign debt Francisco J. Cantamutto, Panamá 2397, Bahía Blanca, Buenos Aires, Argentina. E-mail: [email protected] Daniel Ozarow, Department of Leadership, Work and Organisation, Middlesex University Business School, The Burroughs, London NW4 4BT, United Kingdom. E-mail: [email protected] Copyright © 2016 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduc- tion in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. 2 Economy and Society crises are a spectre that haunts Europe and North America. They are imperilling social cohesion in their societies in ways that were unimaginable just a few years ago. Since 2008, several European countries – Greece, Portugal, Ireland, Spain, Cyprus and Iceland – found themselves unable either to repay or refinance their government debt or to bail out over-indebted banks. Each had to call upon the European Central Bank (ECB), the International Monetary Fund (IMF) or other European countries for assistance. Meanwhile, the US federal debt, which continues to rise exponentially and now stands at US$16 trillion, has been described as ‘unsustainable’ by the IMF (2015), and the United States has narrowly avoided defaulting itself during several ‘debt ceiling crises’ in recent years. Puerto Rico defaulted for the second time in several months in January 2016 and faces the prospect of financial crisis. In Europe, political responses to debt crises have seen left-wing governments elected that promise to end externally imposed austerity programmes and negotiate debt cancellation. We might instance Syriza’s shock rise to power in Greece, the left-wing coalition containing Communists and Greens that entered govern- ment in Portugal in 2015 and the possibility that a similar coalition including anti-austerity parties (Podemos and the United Left) might assume office in Spain by mid-2016. Sinn Fein became Ireland’s third largest party in a hung parliament following the general election in February 2016, standing on a similar platform. Yet the Greek experience suggests that even when debt can- cellation is part of elected governments’ anti-austerity platforms, international pressure and systemic processes mean that the logic of debt prevails. These include new negotiations to obtain bail-out packages conditioned by structural adjustment and market reforms. As Syriza’s failed attempt to manoeuvre away from this institutionalized conditionality illustrated, seeking to break free is no easy task. This paper analyses the case study of post-default Argentina since 2001 (until recently the largest debt default in history), so as to better comprehend the political economy of debt. It is especially relevant to cases where govern- ments are elected on anti-austerity platforms and promise, and even achieve, debt cancellation, as occurred under the presidencies of Néstor Kirchner – – Downloaded by [Middlesex University] at 07:28 19 April 2016 (2003 2007) and Cristina Fernandez de Kirchner (2008 2015). Whilst the geopolitical contexts between Argentina and European Union or North Amer- ican countries are clearly different, they share many of the threats posed to indebted economies, including international financial institutions’ attempts to impose neoliberal reforms as a condition of bail-out funds and speculative attacks by hedge funds.1 Indeed, in Argentina’s case, following the 2001 default and significant debt write-downs, and despite being the fastest- growing economy in the western hemisphere between 2003 and 2007 (World Bank, 2015) it controversially entered into selective (partial) debt default again in 2014. The paper argues that speculative finance capital is the direct beneficiary, in this context, of a lack of regulatory controls within the economic, political and legal architecture of the global capitalist system, with the recent intensification Serial payers, serial losers? 3 of hedge fund speculation on national debts in Argentina, Greece, Puerto Rico and elsewhere being symptomatic of this. In Argentina’s case, the Kirchner gov- ernments maintained an official ‘repay-as-much-as-possible’ negotiation strat- egy under which its creditors became ‘partners’ in its economic recovery. Under this seemingly win-win strategy, rates of repayment were partly pegged to macroeconomic performance (GDP). Yet, paradoxically the debt has continued to grow. Some scholars argue that corruption or economic mismanagement is also responsible for increases in public debt (Ferrer, 1997). Whilst these are contri- buting factors, no academic source exists to evidence a systematic relationship between the failings of individual agents and indebtedness. Instead our approach is to explain that the national debt trajectory in Argentina’s case can be better understood through the logic of debt within the financial system, far outweighing such confounding influences in explaining tendencies towards indebtedness. Indeed, whilst