Thursday, July 18, 2019

OPINION AND ANALYSIS | 08-09-2018 10:35

Politics 0, the markets 10

The experts’ inability to come up with something really convincing was understandable. The markets are mysterious beasts.

Mauricio Macri must be one of the few people on earth who has managed to win the warm support of both Barack Obama and Donald Trump. He also gets on fine with the leaders of China, Japan and most European countries, including Russia, as well as the International Monetary Fund. It would seem that the planet’s entire political establishment is solidly behind him but – unfortunately for all of us – his networking skills do not impress the markets one bit.

Were it possible to choose between enjoying the approval of the world’s potentates and having a good relationship with the markets, a sensible president would much prefer the latter. Macri may be the darling of the global elite, but that cuts little ice with the men and women who follow the flow by moving astronomical amounts of money from one country to another as the day’s fashion dictates, with much of it ending up in the United States whenever storm clouds appear on the horizon.

Several months ago, the markets, these hardto-pin-down but ubiquitous and immensely powerful entities, decided that the time had come to remind Argentina of some home truths her leaders appeared to have forgotten. They set about this with their customary brutality, subjecting her to a series of financial barrages so fierce that they almost sent her crashing down into a swampy wasteland where she would have been left to rot.

Though the government hinted that to avoid such a fate it would appease the markets by doing whatever they wanted, neither Nicolás Dujovne and his aides nor the eminent economists who showered them with often contradictory advice could tell them exactly what that might be. Would reducing the deficit to zero be enough? Slashing public spending? Sacking a million expendable government employees?

The experts’ inability to come up with something really convincing was understandable. The markets are mysterious beasts. Nobody really knows what makes them tick. Perhaps this is just as well; were some genius to find a foolproof method of predicting what they would do tomorrow, he (or she) could quickly collar most of the world’s money.

Some people close to the government snidely attribute the markets’ behaviour to the ignorance of Wall Street brokers who, they surmise, think Argentina is Anatolia and Macri a less obnoxious version of Erdogan. Others are more realistic; they say the emergency was the result of the Fed’s willingness to keep increasing key interest rates, a policy change that harmed countries accustomed to living on borrowed money and did not discriminate between friends and enemies. Macri’s critics will have none of this; they blame the turmoil squarely on his amateurish approach to economics, politics and much else.

For the many conspiracy theorists among us who take it for granted that the markets serve as the shock troops of global capitalism and make it their business to punish countries that refuse to fall into line, their recent behaviour cannot make much sense. Why are they attacking Macri – a man who is often accused of being a heartless neoliberal – while allying themselves with his populist and hard-left foes? After all, were he to succeed, everyone would benefit, but should he be replaced by a populist or Trotskyite, the world would be that much poorer. If asked, most big market operators would probably agree that Macri is far better than any likely alternative and should be given all the support he needs, but few are willing to back their sentiments with hard cash.

For Cristina Fernández de Kirchner and her supporters, people who think the markets are reactionary by nature, and therefore deserve to be treated with contempt, the sudden devaluation of the peso, which – among other things – forced the government to abandon its commitment to snail-paced gradualism and put its foot on the accelerator, was a most welcome development. For their own reasons, they want Argentina to follow Venezuela into the dark and are more than happy to help speed her on her way by calling on their followers to ransack the local supermarkets.

Politicians the world over like to think that it is thanks largely to their endeavours that economies perform as they do. They agree with Macri’s Radical Civic Union associates who have long insisted that “economics should always be subordinated to politics,” a principle they doggedly applied, with catastrophic effects, when in office; after Raúl Alfonsín cut short his term in the Pink House, his last Economy minister said he had been the victim of a “market coup d’état.”

However, even if Trump, Merkel, Xi Jinping and the rest of them were to close ranks and order the markets to do their bidding and give Macri a break, unless they ponied up a vast amount of money their exhortations would be met with derision. When the conditions are right, a single individual can set off a run on a country’s currency, but by now most politicians must be aware that attempting to steer the markets in one direction is akin to herding cats.

Too many moneymen have grown used to thinking that Argentina is a busted flush, a country which plays a hand most others would envy so badly that it always loses. Convincing them this is no longer the case will not be at all easy. Their advisors can tell them that for almost a century Argentines have lived beyond their collective means and, seeing that most individuals think they are fully entitled to do so, they are not about to change. Such sceptics see Macri as a quixotic figure who may have the right ideas but is almost certain to fail and leave the door open for yet another Peronist to stride in and set about wrecking whatever remains. As a result, Argentina would be much poorer but not a bit wiser.

The Peronist leaders Macri and his backers describe as “rational” think their movement has learned a lot in the last few years and deserves to be given another chance. Few outsiders take them at their word. As far as most are concerned, Peronism is the destructive force that ruined what was once regarded as the most promising country in the entire world. This, plus the feeling that Macri’s go-slow policies were getting nowhere, explains why the markets suddenly decided Argentina should be left to her own devices no matter what happened to her inhabitants while she was about it.

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James Neilson

James Neilson


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