Right after the economic crisis the country went through over ten years ago, which reached its climax in 2001, Argentina bounced back and entered a period of relative prosperity due to favorable foreign trade conditions. Nevertheless, the situation of the average Argentine worker remains the same as it has been for hundreds of years: their access to the means of production, to capital, is still systematically restricted by the State.
1) Thanks to what is already an incipient recession, the country’s current economic situation is deteriorating rapidly. 75 percent of Argentine workers earn less than 6,500 pesos per month (about US$590), while half of those employed earn less than 4,040 pesos (US$367) per month, i.e., little more than the minimum wage of 3,600 pesos (US$327). The 25 percent that earns the least charges less than 2,500 pesos per month (US$227), the rate of informal employment has already reached 33.5 percent, and 1,200,000 people are unemployed. And these already meager income levels are further eroded by rampant inflation and heavy tax burdens.
Half of the workers who earn the least and consume most of their income, face a 21 percent VAT tax. This is an extremely regressive tax, since a worker with a salary of 3,600 pesos, who consumes most of it, pays taxes that represent more than one-fifth of their salary, while someone with a salary of 10,000 pesos — if we assume their monthly consumption level is equal to the minimum salary as well — pays only 7.5 percent of their income in taxes. In addition to all this, the government’s failure or unwillingness to update income tax brackets in an inflationary environment has swept away the wages of higher paid workers: a construction worker who earns 15,000 pesos (US$1,363) or more, gives up almost 40 percent of their income to the state.
Thus Argentina is emerging as the country where the state has the greatest influence over the economy in the region, and one of the countries in the world where employees pay the most taxes. Due to outdated tax brackets applied to workers earning decent wages, VAT and income tax are the main contributors to the state’s coffers in nominal terms, over and above taxes applied to large soy plantations and fuels [1].
2) But worst of all, the Argentine wage-earner today has less alternatives for emancipation and independence than ever. Even if they could manage to save a bit by somehow avoiding the sting of inflation, they face overwhelming barriers for entering markets, mainly due to national laws and municipal regulations for starting businesses. These restrictions raise startup costs for virtually any modest enterprise to over 100,000 pesos (over US$9,000). But because it is actually extremely hard for workers to avoid the effects of inflation, investment from savings on wages is virtually impossible.
Credit is virtually inaccessible. Banks charge interest rates of around 70 percent, and don’t lend less than 120,000 pesos for small or medium-sized enterprises. Furthermore, banks offer around 18 percent annually on deposits to savers, a trifle when compared with the rates they charge their customers for consumption loans and credit cards. The profits earned by banks for their monopoly on credit are unmatched in other sectors of Argentina’s economy. And with the last devaluation of January this year, profits grew even more. In fact, it could be said that apart from the government, banks were the only beneficiaries of the devaluation. All other sectors suffered a heavy loss in their purchasing power. During the first quarter of 2014, the Argentine economy didn’t grow, yet the banking sector boasted a 300 percent increase in earnings when compared to the same period of 2013 [2].
3) Finding it impossible to gain financial freedom through savings or through credit, all that remains for the average worker is to flee towards assets that enable them to at least protect the value of their scarce capital against inflation. This used to be done mainly through the purchase of US dollars or any other foreign currency, but the state, in an effort to enclose resources to support its client network, imposed a rigid set of foreign-exchange controls in 2011. The system was so rigid during the first stages of its implementation that it fueled a strong black currency market. It was only made somewhat more flexible in January 2014, and for the benefit of a privileged few: only those earning 7,200 pesos per month (US$654) — the equivalent of two minimum wages — or more may acquire foreign currency, and from that point onwards, the allowances for foreign currency purchases grow in tandem with the level of earned income. It is hard to think of a more regressive scheme for rationing a scarce resource.
In other words, more than 75 percent of Argentine workers are left out of the foreign-exchange market, making it extremely difficult to hedge against the inflation of the Peso. The flight towards other assets, such as durable goods like cars — I don’t take real estate into account because it has been inaccessible to the majority of the population for decades — has been massive, and along with Brazilian purchases, is the main factor compensating the reduction of staff and operations by major automakers due to slower economic growth. In short, the Argentine wage-earner has little choice but to work for someone else for a miserable salary that quickly melts away due to inflation — if the incipient recession doesn’t drag them into unemployment altogether.
4) With the crisis of 2001, the popular spirit was such that the slogan on everyone’s mind was “throw them all out,” a clear reflection of the people’s total loss of confidence in the political class. The proliferation of neighborhood assemblies, occupied worker-managed workplaces, and popular organizations without visible political leaders were the norm until Eduardo Duhalde’s police State paved the way, through repression and economic adjustment, for the first government of Néstor Kirchner in 2003. Today, despite poverty figures not being as dramatic as they were back then, the spirit of the Argentine people is similar, but definitely not mature enough.
Still, we are reaching a point at which the legitimacy of representative democracy is reaching a clear historical low: regular people seem to be realizing that the whole political show is all about sustaining the livelihood of the political class, and that once again, the course of events will evolve as it repeatedly has for decades. This perception has been boosted by the fact that the leading candidates for the 2015 presidential elections are all Frankensteins from the Kirchnerist/Duhaldist/Menemist laboratory. Even the “rightist” faction led by Mauricio Macri has greatly warmed up to the current government.
On the other hand, the statist left’s popularity has grown considerably in recent years, especially in some of the country’s major trade associations, and has gained a good chunk of legislative positions. The average worker is no longer convinced by Peronism, which has morphed into what radicalism became during the early twentieth century when it came to power: a purely conservative movement. However, despite the advancement of alternatives to the hegemonic Peronism being a very positive development in itself, it is still the authoritarian left of always. Their proposals are, beyond the “assembly” or “democratic” rhetoric, more centralization, more power to the state, and more taxes on producers.
5) I think Argentina needs a leftist movement that truly advocates for the emancipation of the producer, for the elimination of monopoly privileges in banking, land, and industry, and that doesn’t lean the weight of the state over the shoulders of workers and entrepreneurs — a left that leaves all political and economic decision-making in the hands of citizens. A libertarian movement. A movement that doesn’t spring from the heights of the classical liberal spectrum, who in any case would not approach workers for more than urging them to read Ludwig von Mises and to glorify Juan Bautista Alberdi. There is a huge cultural gap between this alleged rationalism, inherited from the eighteenth century, and the Argentine cultural heritage. The same distance that exists with the rusty figures of Marx and Trotsky that the left pretends to impose.
The Argentine mindset is fundamentally libertarian due to historical, cultural, and idiosyncratic reasons — that’s the key fact we have to work with.
[1] Tax Collection — Annual Series 2014, Federal Administration of Public Revenues (AFIP). A frequent argument against this criticism of statist depredation is that the collected monies “come back” to the people in the form of public or social services, such as the Universal Child Allowance (UCA), or educational services. It is important to note that the UCA is merely a superficial remedy aimed at containing the destructive impulses of the lumpenproletariat (that we all know very well ever since episodes like those of 2001), and that despite the increase in public-education investment from 4 percent to 6.2 percent of GDP, student enrollment in private schools grew seven times more than in public schools due to the continuous decay of the quality of public education, which does not offer any hope for the future for its pupils and keeps teachers in utterly precarious labor conditions. Again, workers suffer a double whammy: they sustain public education with their taxes, and at the same time make an incredible effort to afford paying for the private education of their children.
[2] This is nothing new. It has been pointed out by a great number of thinkers who emphasized the need for the worker to have the capacity to access credit for their emancipation, from Proudhon, William Greene, Benjamin Tucker, and Silvio Gesell, to Kevin Carson in more recent times, among others.
Translated by Alan Furth from the original in Spanish.
