PETRAS ESSAYS IN ENGLISH

June 20, 2002

Argentina: Between disintegration and revolution

James Petras and Henry Veltmeyer
Rebelión

Introduction

Throughout the early and mid-nineties, the international financial institutions (the International Monetary Fund and the World Bank), the regional financial institution (The Inter-American Development Bank) and the G-7 countries (North America and Western Europe) praised Argentina's liberalization program as an economic model for the Third World.(1) Then President Menem and his Economic Minister Cavallo promised the Argentine people that they would soon become part of the "First World."

Today, Argentina is in total disintegration, not only is the economy in its fifth year of recession/depression, but its banking system has collapsed, the unemployment rate has skyrocketed and over half the population live below the poverty line. This paper will examine the neo-liberal policies advocated by the IFI and G-7 and implemented by the Menem regimes (De la Rua and Duhalde) from the 1990s to 2002 and then critically analyze the theoretical claims and practical results leading up to the present time (mid-year 2002). We will argue that these policies and the socio- economic forces that implemented them led directly to the disintegration of the country. In order to measure the depth and scope of national disintegration we will focus on three sets of indicators: (1) collapse of the economy - focusing on industry, finance and services; (2) mass impoverishment, examining employment, income, health and nutrition, (3) the breakdown of political authority and the level of social conflict.

We will then turn to examining the causal linkages between the neo-liberal policies, the structures of state power and international subordination to the disintegration of Argentina. The logic of our inquiry will next turn to analyze the consequences of the disintegration of Argentina in relation to (1) its former patrons in the IFI and G-7, (2) the current demands made by its ex-external benefactors and their implications, (3) the alternatives to disintegration and subordination embodied in two distinct programs, Plan Phoenix and Plan Prometheus.

Our study will be guided by the following hypothesis. (1) The Argentine economy is in the process of irrevocable and continuous regression leading to the disintegration of national sovereignty, mass impoverishment and economic depression. (2) The principle cause for regression is located in the neo-liberal structures of power and policies which facilitated pillage of the economy, massive corruption and rising foreign debt with no commensurate growth in productive forces. (3) The failed neo-liberal policies, economic pillage and spiraling foreign debt, made Argentina unattractive to foreign investors and official lenders who proceeded to demand greater sacrifices while effectively refusing new financing to re- float the regime and economy. (4) Failed neo-liberal states like Argentina confront three alternatives (a) becoming neo-imperial colonial subjects, (b) embarking on a neo-structuralist project, (c) undertaking revolutionary transformations.

These hypothesis guide our research and direct our inquiry into the causes of failed neo-liberal states and the kind of purposeful action which can avoid, reform or revolutionize nations who have become ensnared in the neo-imperial trap.

Economic Collapse and Mass Impoverishment

No country has fallen swifter and further into mass poverty and experienced a prolonged economic collapse as Argentina. Though most Latin American countries have applied neo-liberal policies, none have been as thorough and rapid as is the case of Argentina. Moreover, no Latin American country was as industrially advanced and with as diversified an economy as Argentina.(2) Finally, Argentina had the highest standard of living in the region, the most qualified and skilled labor force and the political leadership most determined to follow the precepts of the IFI and the G-7.

Argentina is a test case of the efficacy or failures of the neo-liberal approach under optimal conditions: a willing government, a well-developed infrastructure, a skilled labor force, long-term links to world markets and a significant middle class with consumption propensities compatible with Euro-American cultural patterns.

The results of 27 years of neo-liberalism provide us with an adequate time frame to evaluate its impact on the economy and society and avoid circumstantial or conjunctural outcomes.

Mass Impoverishment and Widening Inequalities

The number of Argentines living below the poverty line has grown geometrically; ten years ago there were less than 15%, two years ago it was 30%, in June 2002 the percentage exceeded 50%.(3) In Argentine as of June 2002 the Duhalde regime acknowledge that over 18.2 million Argentines, 51.4% were living below the poverty line. Of these 7.777 million are indigents according to Siempro (Sistema de Informacion, Monitoreo y Evaluacion de Programas Sociales – The System of Information, Monitoring and Evaluation of Social Programs) an official institution under the jurisdiction of the President. Children and adolescences living in poverty are almost half of the poor 8.2 million. Immiseration is growing at an accelerated rate. Between January and May 2002, the number of poor grew by 3.8 million, or 762,000 a month or 25,000 a day. Among the poor, the rate of indigent poor is growing even faster than the overall poverty rate. For example, in 1998 28.9% of the poor were indigent, in June 2002 the rate was 42.6% of the poor. The massification of extreme poverty is manifested in the high rates of malnutrition of children – over 58% of the kids in Matanzas, a working class suburb of Buenos Aires. In the interior there are numerous reports of children fainting in school for lack of food, over 60% of the new born children in Misiones suffer from anemia – a result of government cutbacks in school meal programs to meet G-7 and IMF demands.

Apart from the top 10% of the population and foreign capitalists, the income of all working sectors of the population and pensioners have experienced an average 67% decline in monthly income. The decline in income has been profound, sudden and continual. In 1997, the United Nations Program for Development (PNUD) calculated Argentine's per capita annual income as $US $8,950, in March 2002 it was $3,197.(4) The decline affects all geographical regions of the country. If we use as rough indicators of "class" the different regions of the province of Buenos Aires we can approximate the social impact of the crises. The income in the capital city of Buenos Aires which we can take as largely middle class saw average incomes fall from US $909 a month in December 2001 to US $363 in March 2002; in the working class suburbs (conurbano) of the city of Buenos Aires income fell from US $506 to US $202; in the province of Buenos Aires income fell from US $626 to $US $250.(5) If we examine the occupational structure, the largest decline is among workers in the informal sector and among pensioners. In the Capital, income of the "informals" dropped from US $643 to $257; in the working class suburbs from US $334 to $134; in the province from $394 to $158. Among pensioners the decline was similarly devastating: from $437 to $175 in the capital; from $320 to $128 in the working class suburbs and from $360 to $144 in the province.(6)

The situation is far worse in the other provinces, where pay scales are lower, unemployment is higher and where there are frequent 3 to 6 month delays in payment of salaries and pensions.

For the working and middle class the loss of formal employment means a sharp decline in income. With unemployment doubling between 1999-2002 (May) the destitute and poor from the former working class/middle class has grown geometrically. Employed wage earners in the private sector of the Capital who earned US $904 in December 2001, as under-employed were earning US $257 in the informal sector, 3 months later (March 2002). With a 30% rise in prices during the same period, the real purchasing power in December 2001 dollars was reduced even further.

TABLE 1(7)
The New Income Structure After the Devaluation*


Capital Buenos Aires
Suburbs
Greater Buenos Aires
Type of Income in US $ Dec. 2001 Mar. 2002 Dec. 2001 Mar. 2002 Dec. 2001 Mar. 2002
Average Overall Income 909 364 506 202 626 251
Self Employed 881 353 392 157 522 209
Bank Worker 1081 432 735 294 848 339
Informal Worker 643 257 334 134 395 158
Public Employee 1144 458 624 250 810 324
Private Employee 904 362 550 220 648 259
Pension 437 175 320 128 361 144

*Rounded off to the nearest dollar

The decline of income among the different occupational categories indicates the absolute and relative decline of the middle class, a clear process of proletarianization: bank employees in the capital have seen their income decline by nearly 60%, from U.S. $1081 to U.S. $432 per month and public employees in the capital have experienced a drop from U.S. $1144 to U.S. $458 per month.(8) The current income as of April 2002 of the former middle class does not cover their basic necessities of rent, food, transport, school and health expenses, hence the necessity for multiple employment -- which is near impossible -- for all household members. The downward mobility of the middle class is clear if we compare their current salary with that of employed workers before the devaluation. Private salaries among suburban workers was U.S. $550 before the devaluation, middle class incomes after the devaluation was only 75% of former working class salaries.

If we take the figure of U.S. $400 as the cut-off for the poverty line and U.S. $250 as the cut-off line for indigence we find that every occupational category in the working class in the suburbs of Greater Buenos Aires is below the poverty line and several categories are "indigent." In the Capital, 60% of the occupational groups are below the poverty line (self-employed, informal sector, private sector workers).

Pensioners who depend mainly on their pensions are indigent in all geographical sectors, as are all unemployed workers (25%-30% of the labor force) living in the suburbs and greater Buenos Aires. Even if we assume that some unemployed workers are working in the informal sector, almost all are near or below the line of indigence. The massive growth of unemployment to between 25%-30% nationally, from 40-60% in the working class suburbs and even higher in some of the former one industry towns of the interior, the downward mobility and impoverishment of the working and middle class -- its precipitous decline in income and living standards -- are reminiscent of the worst years of the U.S. depression of the 1930's and of Weimar Germany in the 1920's.

Accompanying and inter-related to the impoverishment of the mass of the middle and working class is the concentration of wealth in the ruling and upper middle class and foreign capitalists and bankers. In 1974 the top 10% received 28% of national income, in 1992 slightly over 34% and in 2001 over 37%, while the poorest 10% received 2.2% in both 1974 and 1992 and 1.3% in 2001 -- before the devaluation and sharp increase of unemployment. (9) In 1974 the top 10% of the rich received 12 times the income of the poorest 10%. If we take into account the gross and common understatement of income by the wealthy, the government statistical office estimates that the current inequalities are much greater; they estimate that the top 10% earns 40 times that of the poorest 10%.(10)

Together the upper classes -- the ruling elite plus the upper middle class -- receive 53% of the declared income, and probably the real proportion is closer to 60- 65% prior to the devaluation. Given the fact that the upper classes were able to withdraw their funds ($30-40 billion) from the banks and send their money outside the country and avoid confiscation (of December 2001), the percentage of wealth in the hands of the upper classes is probably close to 80%. The impact of neo-liberalism has had a profound dual structural effect of impoverishing the working and middle class and enriching the upper classes. In the early 1990's, unequal growth of national incomes based on large-scale entry of speculative funds, foreign borrowing and privatizations of public firms artificially and temporarily raised average income. However, when these short-term injections of capital ended, incomes and employment plummeted for the 80% of the wage and self-employed labor force, while the mobility of capital, high liquidity and non-wage sources of income for the very rich protected their wealth, and led to a vast increase in inequalities.

While impoverishment and income inequalities increased with the recession/depression beginning in 1998, the precipitous fall in income and living standards for the middle class (40% of the population of the capital) took place with the onset of the depression of 2001-02, followed by the confiscation/freeze of bank accounts in December 2001, and the subsequent devaluation and inflation. Financial experts' estimates state that at the beginning of 2001 Argentines had U.S. $86.5 billion in the mostly foreign owned banks in largely dollar accounts.(11) During 2001 and especially beginning in April-November, the upper classes withdrew and sent out of the country U.S. $40 billion. In December the government froze the accounts, and subsequently converted them to pesos (as of June 1, 2002 it is 3.3-3.5 to the dollar). In effect, the accounts were reduced from $45 billion in dollars to approximately $13 billion and declining since there is no indexing. The regime's attempt to convert the remainder into state bonds redeemable in ten years at 2% interest would devalue the saving even further, given the 30% rate of inflation for the first quarter of 2002. This attempt by the regime to swindle the remaining savings was prevented by massive demonstrations by the impoverished middle class -- the pot banging cacerolazos which threatened the Congress and stormed the banks.

The social disintegration and polarization is rooted in the collapse of the Argentine economy, and the deep and chronic industrial depression. During the first three months of 2002 industrial activity declined by over 18%.(12) Industrial regression accelerated between April 2001 to March 2002: from -2% in April 2001 to - 4% in July 2001, to -10% in September to -12 in November to -18% in March 2002.(13) Automobile production is down 55% in March 2002 compared to the same period the year before, while textiles and manufacturing was down 48% over the previous year. In 2001, industry declined 10%. (14) The number of plant closures accelerated throughout the 1999-2002 period, reaching unprecedented levels in the last trimester of 2001 and the first half of 2002. In early 2002 almost three quarters of the industrialists predicted the downturn would worsen.(15) Unused industrial capacity was running at more than 50% in most sectors of the economy, including metal, textiles and auto parts.

The financial system is nearly bankrupt, in part because of large-scale financial transfers to the home office by foreign owned subsidiaries. The foreign debt grew from U.S. $58.7 billion in 1990 to U.S. $139.9 billion in 1998, while capital flight and interest payments in the same period grew to U.S. $115 and U.S. $81.7 billion.(16) In other words, external borrowing largely financed capital flight and part of the mushrooming debt payments, leaving a net deficit in capital flows. This eroded the economy's capacity to sustain growth and subsequently led to the recession, further budget cuts, which in turn turned the recession into a depression, partial debt default. The foreign and domestic elites' massive withdrawal of funds -- aided and abetted by the foreign banks -- led to the confiscation of savings of millions of Argentines and the virtual collapse of the financial system. Throughout 1999-2001 IMF loans merely served to pay back private banks, and the IFI's, while exacerbating the debt problem, deepening the recession and lowering living standards. In order to get short-term loans, Argentina was paying 16% over U.S. T-notes as late as August 2001.(17) Once the fall took place, neither the IFIs nor the World Bank nor the G-7 were willing to lend new money, unless the central government repealed its Economic Subversive Law, (a law designed to prosecute illicit banking practices), abolished the provincial currencies which kept the local economies afloat and fired several hundreds of thousands of health, educational and other public employees.

The key concern of the IFI with repealing the Economic Subversive Law was that it was an instrument to prosecute G-7 banks which were involved in the illegal transfer of over U.S. $50 billion dollars in the year 2001-02. (In June 2002, under IMF pressure the law was repealed). While the IMF blamed the Argentine "savers" for the financial crisis -- for panic withdrawals substantial data demonstrates that the private, principally foreign owned banks had already consummated a massive transfer of funds out of the country and were not willing to re-capitalize the banks.(18) Furthermore, the IMF/World Bank pressured the Argentine government to assume the private banks' obligations to their depositors and issue ten year state guaranteed bonds in lieu of direct payments to holders of savings accounts. In the absence of funds and an unwillingness of the head office to re-capitalize the Argentine subsidiaries the foreign and national private banks claim to be on the verge of bankruptcy, the moment that the rightful claimants attempt to withdraw their savings. The only measure preventing a massive collapse is the freeze on withdrawals.

In summary, the neo-liberal experiment has not only impoverished 80% of the Argentine people, ruined its industries, driven over a quarter into or near to bankruptcy and robbed its middle class of its savings, but it has undermined the very foundations of the capitalist economy. Apart from the growth of monumental inequalities, the neo-liberal economy led to the pillage of the economy, with the illegal/legal transfer of tens of billions of dollars out of the economy and into overseas investments, saving accounts, real estate, and treasury notes. For those capitalists with fixed capital and limited working capital the neo-liberal policies had disastrous consequences, because of exorbitant interest rates, unfair competition from the unrestricted entry o cheap imports and from the collapse of the domestic economy because of high unemployment rates and the plunge in middle class living standards. Neo-liberalism is like the 'sow which eats her own kind'.

Causes of the Collapse

The immediate cause for the collapse of Argentine capitalism was the role of the foreign owned banks and the IFIs led by the IMF in emptying the Argentine financial system. The longer term reasons are rooted in the regressive structural changes (privatization/SAP/open markets) and quasi-criminal 'deregulation' of the economy which led not only to the collapse of domestic production but the wholesale pillage of the economy and later millions of saving accounts.

The economic experts and other apologists for the financial elite argue that the bank crisis was a result of savers who withdrew their deposits and took them out of the banking system.(19) While withdrawals by savers was a cause of the crisis, it was not the main or determining cause for the crisis. During the period leading up to the crisis (Feb. 2001-Nov. 2001), the financial assets (loans and other credits) of the financial system declined $44.8 billion, of which $37.3 billion came from the private sector (83.4%), of which $26.5 billion (59.1%) came from the ten biggest private banks.(20) In other words, in the months leading up to the crisis, the ten leading banks moved approximately $27 billion out of the Argentine financial system. This is evident from an analysis of the assets and liabilities of the banks. "Other credits by financial intermediaries" among assets and "Other obligations by financial intermediaries" among liabilities.(21) The existence of these categories reveals the fact that the Argentine financial system operated on two levels, a formal system of deposits and loans and an 'informal sector' where mega-accounts operated, largely to launder funds and carry out all the speculative activity in the financial sector. The "other" categories in Feb. 2001 amounted to $56.9 billion in assets and $60 billion in obligations.(22) By November the totals of 'others' declined to $25 billion for assets and $35 billion in obligations. A closer analysis reveals that of the $25 billion decline in assets, over 74% of it took place among the ten biggest banks.(23) The IMF loans to Argentina served to cover the growing drain of resources out of the financial system by the financial elites, while imposing harsher cuts in public spending and investment. The triple phenomena of deepening economic depression, financial flight and growing indebtedness was caused by the alliance of the IFI, the foreign and local big financiers and the foreign owned banks. The small and medium Argentine depositors were victims of a covert financial swindle not the perpetrators, as the economic experts charged. Their desperate and belated effort to withdraw their savings was a reaction to the financial swindle executed by the financial elites. Most small and medium savers, however, were not successful. Bank liabilities after the flight of big accounts and the drying up of overseas credits far exceeded their assets; with the economic crisis, many of their outstanding loans were delinquent and there was no way that headquarters would inject new funds to cover the demands of depositors. The government intervened to "save the banks" by effectively freezing all deposits and preventing the depositors from recovering any of their savings. The gross class character of the government's financial rescue plan infuriated the dispossessed middle and lower class. The subsequent devaluation of the peso in effect robbed them of two-thirds the face value of their frozen savings and depressed their income, while the upper middle and ruling class who got their money out of the financial system were able to lower their cost of living, production and consumption by a commensurate 65%.

The financial collapse and economic depression are rooted in the neo-liberal economic policies and the context in which they were inserted. Even more fundamental are the nature and structure of the ruling and governing classes who imposed the neo-liberal model which has destroyed the Argentine economy. Unlike most of the rest of Latin America, Argentina was a highly industrialized country with one of the highest percentages of its workforce employed in the manufacturing sector in the world during the mid-1970s. Even by the late 1980's, Argentina was still proportionately the most industrialized country in the region. With a highly skilled labor force which was relatively better paid than the rest of Latin America and a welfare system for unionized workers comparable to Europe, there was a substantial domestic market. Argentina possessed some of the richest and most extensive cultivatable soil in the world and a very competitive agro-export sector, as well as plentiful energy sources (oil, natural gas, hydropower). In a word, Argentina possessed an attractive market for exporters, profitable resources for investors and substantial banking deposits for overseas bankers. The rapid and extensive liberalization of the economy had a shattering effect on this heavily industrialized country. Argentine industry was pressured from the side of cheap consumer imports from low wage areas (Asia) and imports from high tech, large-scale heavily subsidized Euro-American manufactures. The liberal argument that the "competition" would make Argentine enterprises more "efficient" was false -- few Argentine companies had the scale and financing to compete with the top U.S./European multinationals and even the lowest paid Argentine workers could not compete with a dollar a day Chinese workers. The rapid lowering of barriers also precluded any preparation for competition and the lack of reciprocity in lowering subsidies and barriers in the U.S. and Europe prevented Argentine companies that were competitive from capturing overseas markets.

The historical and contemporary experience with liberalization policies of the U.S. and the countries of the European Union has been a gradual process of selective liberalization, at least in contrast with the Argentine experience. Free convertibility in Europe did no take place until the economies were on their way to sustained expansion -- which for some did not take place until well into the 1960's. Trade barriers, including quotas, tariffs and non-traditional constraints (health barriers, unfair trade and anti-dumping rules) are still frequently and extensively used to protect non- competitive sectors. Mass state subsidies and fiscal deficits are used to promote exports and to stimulate domestic growth.

In Argentina, the trade barriers came crashing down. The peso was tied to the dollar limiting any expansive monetary policies to stimulate the economy. Subsidies were cut and debt payments took priority over productive investments. Loans were secured by privatizing strategies affecting lucrative sectors of the economy, undermining public earnings, increasing the costs of production and therefore lessening competitiveness. Privatization led to severe cutbacks in transport linking the provincial economies and undermining their industrial and commercial transactions. Whereas in mineral and raw material export economies like Chile, liberalization opened the economy to foreign investment in the established export sectors which were competitive and complementary to the industrial capitalist economy, in Argentina's much more developed and diversified economy, industry was adversely affected. The flood of imports and the decline of national industries led to bankruptcies and unemployment, the conversion of manufacturers into importers and commercial activity and, in the provinces, the inflation of the public sector as the employer of last resort. Large sums of investment switched form risky productive activity into high interest bearing financial instruments. (24)

The Menem regime gave the appearance of an "affluent regime" based on heavy borrowing and windfall income from the sell-off of public properties. Most of the inflows of capital raised upper class consumption and facilitated wholesale corruption by the entire political class and their entourages of public officials, judges, customs, police, military officials.(25) Foreign bankers were willing to lend because the interest rates were 10 to 20 points above the Euro-U.S. rates and there was easy liquidity given free convertibility and the de facto dollarization of the economy ensured monetary stability. Thus, each step of the liberalization process weakened the fundamentals of the economy: the domestic economy shrank, entrepreneurs fled into the apparently lucrative financial-speculative activity, debt payments skyrocketed, the loans-for- privatization deals were finite and approximating their limits and external flight of capital accelerated as the upper classes sensed that the whole liberal edifice would eventually collapse and there would be neither a productive system nor monetary resources to revive it.

Crucial to the collapse of the economic bubble economy was the behavior of the Argentine big bourgeoisie.(26) Powerfully ensconced in the Menem regime, they were the initial beneficiaries of the privatization process and the loans from overseas lenders.(27) They were also the group which dictated economic policy. The Menem regime's point of reference for developing the liberal agenda was foremost the dominant classes in Argentina who had investments overseas, were tightly linked to overseas banks via joint investments in privatized banks and via foreign loans and who demanded a peso easily convertible into dollar equivalence. Liberalization to the maximum allowed this 'transnational' Argentine bourgeoisie to buy public banks and enterprises on the cheap and sell them to foreign capital.(28) Deregulation of the banks allowed massive transfers of funds out of the country and the laundering of illicit gains. Cheap imports, easy loans and fast exits of funds were the Argentine elites definition of liberalization.

For obvious reasons the G-7 countries and the IFI were wildly enthusiastic: they gained control over banks and deposits, lucrative telecommunication, airlines, oil and numerous other money-earning public enterprises. They encouraged the regime to proceed full speed ahead with reckless abandon.

As the domestic economy, particularly in the provinces collapsed, the provincial governments ran huge debts -- partly to finance corrupt political machines to sustain the national government and partly to avoid provincial popular revolts. Unlike South Korea, China and Japan, large-scale corruption did not grease the wheels of national production: bribes greased the hands that sold off lucrative public enterprises to foreign investors who stripped assets and reduced local production in favor of large- scale speculative activity. There was an inverse relation: as corruption grew, industry declined, tax receipts were negligible and competitiveness became an empty slogan.

Foreign ownership which liberal advocates described as a dynamic force for sustained growth turned out otherwise. The Argentine experience describes the vicious parabola: an initial increase in foreign investment which encouraged the Menem regime to exuberant (or delirious) deregulation and privatization which led to a large-scale influx of capital -- portfolio and direct -- followed by a sharp decline as lucrative sectors were taken over, workers were fired, local markets shrank and large- scale outflows occurred. The result was a one short spurt of growth in the early to mid-1990s, followed by decline and collapse. The sequence was entirely predictable as foreign investors initially took advantage of easy buy-outs with almost guaranteed profits (in monopoly markets) and exorbitant rates of interest and then silently but quickly withdrew funds as the economy remained with few assets and a highly uncertain future. The IFI led and followed the parabola: conditioning public loans on greater liberalization during the initial period in support of foreign investors and then as the economy ran down, and liabilities and social discontent mounted, they imposed even harsher conditions to further financing.

The very process of regime-IFI negotiations changed over time. In the beginning when many resources, markets and opportunities were available for foreign investors, the IFI gave the regime a blank check -- lending billions of dollars and giving the green light to private bankers and overseas investors to exploit the "emerging market" for extraordinary profits. The result was a major takeover of lucrative banks, telecommunications and petroleum by Spanish banks and multi-nationals and U.S. investors. Meanwhile, foreign investors moved in on the agro- industrial sectors, retail trade (mega malls), real estate and hotels, in association with a small nuclei of the Argentine economic elite and sectors of the kleptocratic political class, headed by the extended Menem family and political entourage.

The first major adverse affect was the slashing of employees in the process of preparing public enterprises for privatization. The state fired hundreds of thousands of workers in the telephone, railroad, waterworks sectors, assuming the economic costs and taking responsibility for repressing the ensuing protest. Many cities in the interior, like the petroleum city of Neuquen, were turned from prosperous cities to ghost towns, with 30-40% unemployment rates. Promises of "alternative employment" were never kept, as provincial and local officials linked to the central government either outright stole the funds or used them to finance their political machines, through expansion of unproductive "administrative" jobs.

The second negative result was the reduction of services and transport, thus isolating regions from regional, national or even international markets and suppliers. The balance sheets of the privatized companies were based on enterprise profits, not the returns and revenues of the multiplicity of industries and farms which depended on the power, energy, telecommunication and transport networks. Thus while the balance sheets of private foreign owned enterprises showed up in black, the results for the outlying economies were in the red and increasingly dependent on central government subsidies. Moreover, the public costs of maintaining the infrastructure to sustain the privatized enterprises increased, while the revenue to the state declined, thanks to large-scale tax exemptions and subsidies. The net effect was increased public spending and intervention to promote privatization -- while revenues declined - and the need for greater cuts in social budgets and increased overseas borrowing at increasing rates of interest, as the foreign debt doubled and interest payments increased 2.5 times between 1992-98. Privatization deprived Argentina of low cost inputs to industry, increased transport costs and overvalued the peso thus pricing Argentine products with high value added out of the international and even regional markets. Liberalization, far from increasing competitiveness of Argentine industry, led it down the road to bankruptcy and to de- capitalization of basic research and development (R and D). Support for industry and innovation was severely depleted as public funding for university and research centers declined and private funds increasingly turned to the bloated and high earning financial sector.

The Menem government's unilateral lowering of tariff barriers weakened local enterprises without rewarding efficient producers, since the regime failed to secure reciprocal agreements with the U.S. and E.U. to lower their trade barriers. The net result was that Argentina played by two distinct sets of rules: it followed the rigid precepts of liberalism in relation to its economy while accepting the flexible 'liberal/protectionist' rules of its major trading partners.

The continuation and deepening of the liberalization policies through the 1990's -- the 'time bomb ready to explode' -- was based on the structures of state power. The Menem regime was a highly authoritarian regime which bypassed Congress or bribed legislators, packed the Courts to secure compliant majorities, centralized power in non-elected officials, organized and generally financed a powerful party-state machine that inhibited or isolated organized opposition in the poorest neighborhoods -- till the collapse of the late 1990's. In addition, selective state-party thuggery organized by the intelligence agencies, silenced through threats and occasional selective assassinations, media based critics.

The "centralization" of legislative and executive powers in the presidency -- in his very person -- and the dictatorial methods Menem used to legislate (most industries and banks were privatized via Presidential decrees) facilitated rapid and extensive liberalization. The concentration and centralization of Argentine capital was both cause and consequence of liberalization and grew in tandem with the centralization of executive power. The political reference point and strategic outlook of the Menem regime was profoundly influenced by the structural links to the big economic groups which emerged during the dictatorship and thereafter. (29) While the internal composition of the big groups varied, their outward politics was consistently liberal and tied to broadening and deepening their ties to the European and U.S. financial networks. For President Menem and his economic czar Cavallo, these big economic groups and their international circuits and partners were the economic reality: the purpose of the state was to cater to their interests, consolidate their structures and expand their opportunities. Neo-liberalization meant the elaboration of policies facilitating the big economic groups' buy-out of public enterprises, easy transfer of capital abroad, the facile access to foreign loans and the socialization by the state of private losses.

The state under Menem was involved in funding the consolidation of private economic empires, rather than financing productive investments by rising small and medium entrepreneurs. Its liberalization of trade allowed the big economic groups to turn to finance, real estate and commerce rather than investing in upgrading productivity in manufacturing. Neoliberalism meant the regime specialized in selling off public resources, not increasing production or productivity. The Argentine big economic groups in turn bought public enterprises not in order to convert them into efficient productive or service units, but to resell them at a profit to foreign capital.(39) The large influx of E.U. and U.S. capital changed the configuration of the Argentine state: from a liberal to a neo-colonial liberal state, in which the state, lacking domestic revenues, depended increasingly on overseas loans and income from export income generated by foreign owned enterprises.

The transition from a mixed economy to a liberal and then neo-colonial liberal economy accompanied the rise and fall of the 'vicious parabola' of the Argentine economy. A sequence which could be described as a Greek tragedy where the hubris of the liberal protagonists foreshadowed the ultimate collapse of a deeply flawed relationship. The analogy, however, is itself deeply flawed because the protagonists - - the Menems, the bankers, the IFI -- are not the ones who in the end suffer the downfall, the Argentine nation and 80% of its people are the tragic figures.

Consequences: Disintegration, Abandonment and Destitution

As the Argentine economy went from a recession into a full-scale depression, as industrial production declined from -6% in the last quarter of 2001 to -15% in the first quarter of 2002 and as the financial system headed for a crash and it became apparent that Argentina would default on most of its foreign debt, the IFI, the overseas banks and the G-7 countries refuse new loans except under the most onerous conditions.(31) In December 2000, the banks granted a $40 billion IMF led package and in August 2001 the IMF granted the tottering De la Rua regime an $8 billion stand by credit, $5 billion of which went to the Argentine Central Bank and out of the country as the upper middle class moved billions between January and November. Several billion were destined for debt restructuring, in effect paying domestic and overseas bondholders. Neither allocation did anything to stimulate the local economy, lower interest rates or prevent private withdrawals of bank deposits. In effect, the IMF loan to Argentina increased its debt from $130 billion to nearly $140 billion in 2001 without tackling the fundamental structural problems -- thus setting in motion the final collapse in December 2001.

The reason the loans failed to "save" the Argentine economy was because they weren't meant to, they merely provided funds to be recycled through the economy to "save" the upper class and the big bond holders. Big lenders recognized the perilous conditions: the interest rate spread between Argentine government debt paper and U.S. Treasury notes rose to 16.7% in late August 2001. By November, speculators were not buying Argentine paper at any price, as the government inevitably headed for default.

As the Argentine economy collapsed, its overseas lenders and subsidiary banks pressured the regime to freeze deposits, threatening to collapse the financial system and withdraw from Argentina. The government complied. It devalued the currency, reducing the bank's obligation to its dollar depositors. The banks and their governments delegated the IMF to play a lead role in the negotiations to recover their loans, even as the economy was starved for new funding, and state and private investments.

Lacking any profitable public resources, firms or banks to generate revenues or earnings thanks to the earlier privatization policies by the so-called "economic genius" of the Argentine miracle, Domingo Cavallo, received no lifeline from his friends on Wall Street. What Cavallo mistakenly assumed was his personal genius and confidence among world bankers turned into a mirage -- the banks were not interested in floating an economy they had bought, pillaged and were now in the process of discarding, as they moved on to more lucrative sites. Cavallo's secret formula is familiar to any financial swindler: he rolled over overdue high interest government bonds for bonds with even higher interest rates, an unsustainable process that was destined to collapse and in fact did collapse.

The response of the IMF to the collapse was embodied in the IMF mission to Argentina in April 2002. Led by one Anoop Singh, the mission intervened, interviewed and publicly dictated policy for each and every aspect of Argentine domestic economic and social policy.(32) In the midst of the recession, he demanded Argentina cut spending, eliminate the provincial currencies and debts, facilitate creditor takeovers and liquidate debtor enterprises and abolish banking legislation which provides sanctions for foreign banks engaged in illegal movements of currency. In other words, Singh demanded an austerity state policy geared to securing a government surplus to repay overseas bankers, while providing facilities for further outward transfers of funds and easier takeovers of indebted enterprises, by foreign banks.(33)

In political-economic terms, this is called picking the meat off the skeleton. With Argentina in a major depression, the last thing it needs is to balance its budget and reduce public spending -- especially with 6 out of 10 workers unemployed in the poor suburbs and 3 out of 10 nationally.

But Horst Kohler, the president of the IMF, thought that Argentina should be squeezed further: "Argentina," he stated in April 2002, "must take the bitter medicine to get out of the crisis."(34) The "bitter medicine" is more cuts in public spending and elimination of more public services and greater unemployment. As Kohler himself admitted, at least 450,000 public employees would have to be fired, on top of the 30% unemployed.(35) This would raise the number of unemployed to between 35 to 40% -- a catastrophic situation. He then proceeded to blame the victim: "The problems that Argentina is suffering from are of domestic origin."(36) As if ten years of IMF conditioned loans, overseas missions, adjustment programs and liberal ideology played no role in bringing about the crisis.

The U.S. Secretary of the Treasury Paul O'Neill weighed in on the side of the IMF's "final squeeze", endorsing the IMF bailout of the bankers and the takeover of the remaining sectors of the economy. But he demanded, in typical euphemistic language, 'a political solution'.(37) He called for a strong authoritarian regime capable of ramming the mass job firings, budget cuts and abolition of local currencies policy down the throats of the impoverished Argentines. O'Neill questioned "the leadership capacity" of the Duhalde government.(38) According to an interview, O'Neill said Argentina's problem boiled down to a single question: will the Argentine government do what it has to do, namely, implement the IMF policies.(39) What O'Neill and others in the IFI and G-7 mean by "political will" is precisely to override the interests and survival of 33 million Argentines, elected Congressional officials, governors, mayors and force upon them further bankruptcies and unemployment – to push beyond the 53% poverty level to satisfy overseas bankers and investors.

The E.U. took an equally hard line on Argentina. According to the then French Economic Minister Laurent Fabius, "The responses that the Argentine government has given us [in response to the IMF austerity prescriptions] are not satisfactory."(40) Probably the most obscene remarks came from Anne Krueger, second in command at the IMF, a U.S. appointee and a former Stanford professor. In an interview in the Financial Times she claimed that "the Argentine authorities are not sufficiently realistic as they should be."(41) Realism, according to Krueger, means that in the midst of a depression, cut public spending, lower living standards and increase unemployment. The "realism" referred to is the world of finance capital and its voracious appetite to squeeze even more interest payments from bankrupt provinces, businesses and public treasuries; to withdraw more savings from Argentina with impunity.

The U.S. embassy staff in Argentina went even further. Political attaché Michael Matera claimed the Argentina crisis was due not only to its political leaders but to the entire Argentine people. "The viewpoint of international economists is incompatible with the national mentality of the Argentines. Argentineans have a collective incapacity to change; they are immature and paranoid."(42)

There is some evidence that an additional reason for the Euro-U.S.-IMF hard line is Argentina's unilateral default on the $140 billion debt. According to one Argentine Congressman, an IMF functionary told him, "What we will never forgive is your Congress people celebrating and applauding after (ex-President for a week) Adolfo Rodriguez Saa declared the default."(43) From this vantage point the hard line is meant to warn any other Latin nation which contemplates debt default of the harsh consequences.

The Duhalde regime structurally tied to Argentine transnational financial capital, the agro-export sector and foreign capital can only find a solution via an agreement with the IMF which presumably would loosen the purse strings of private lenders, and lead to a renegotiation of impending debt payments. The Duhalde regime's unwillingness to develop an alternative plan, as dissident Argentine economists demand, is based on long-term, large-scale structural links between the regime and the ruling class. Given the total discredit of that ruling class and its disastrous policies for the 80% of the Argentine population and the disintegration of the nation, and massive active opposition, his political authority is virtually null and his decision-making power is narrowly circumscribed.

The historical background for the finance-pillage-abandon sequence of G-7 and the IFI policies and its shift toward a hard line position is based on two considerations. Over the previous fourteen years Euro-U.S. capital got everything they wanted from the Argentine regimes of Menem, and De la Rua. Secondly, the easy and lucrative 'pickings' of the past are no longer available, only intensive as opposed to extensive exploitation can provide returns at this point in history.

The previous history of the IMF dictating priorities and Argentine government compliance has conditioned leaders to assume regime obedience rather than negotiations and reciprocity. The overseas lenders have always been aware of the venal character of the Argentine ruling and political class, but they were willing to lend funds even if they were pilfered as long as they could, in turn, pillage the economy. Now, however, with pillage completed the choice is between returns to the banks or mismanagement of funds to sustain corrupt provincial electoral machines. The lenders are demanding that the political class cut off the provincial bosses and their bloated public sector to meet their external obligations. If this means adding to the opposition and undermining political support, then the bankers insist by all means take extraordinary powers, show "political will" -- turn the regime into an authoritarian dictatorship. How this leadership would rule -- even with dictatorial power -- given the eventual impoverishment of three-quarters of the population is a question which neither Krueger, O'Neill, Kohler, Wolfenson, ask nor do they have an answer.

Nevertheless, the IFI and the G-7 know that structurally Duhalde has no alternative to seeing the world except through the refinancing by an IMF led group of bankers. They know he is a captive and lifelong representative of foreign capital and their domestic partners and therefore easy prey to pressure. Their perceived vulnerability of the regime encourages the "hard line" approach.

The third factor conditioning IMF and G-7 hard line response is the increasing radicalization of the Argentine population and the massive almost daily protests, demonstrations and popular uprisings. The "risk factor" in Argentina is extremely high in the eyes of investment bankers. The fear is that if Duhalde falls or is overthrown, a populist nationalist regime might result and renege on any agreements. Paradoxically, the demands of the IMF and G-7 if met would likely ignite a major uprising. The higher the IMF/G-7 raises the bar to secure funding, the harder the fall of the regime in jumping it. Implicit in hard line economic strategy, especially among the political and economic elite in Washington and Madrid is the idea that the Argentine military would intervene to overthrow an adversarial popular regime. However, a military coup in the present context would take place in an absolute political vacuum, bereft of any political and social support.

The style and substance of Argentine relations with the G-7 speaks to a new imperialism:(44) the pillage of the economy, the growth of vast inequalities, economic stagnation followed by a profound and enduring depression and the massive impoverishment of the population as a consequence of the greatest concentration of wealth in 20-21st century Argentine history. The new imperialism works directly through the inter-state system and the subsidiary financial institutions like the IMF to dictate policy. The April mission of the IMF, with its public pronouncements on every aspect of the Argentine economy, the blatant dictates of the U.S. Embassy and the G-7 economic ministers strongly resonate with the colonial relationship of the past. The subservience of the Argentine regime, its willingness to implement policies, which profoundly deteriorate living standards to meet imperial demands, speaks loud and clear of a new colonial type of empire. The New Colonialism, however, imposed on a former industrialized country with relatively high Third World living standards has not only provoked greater economic inequalities but also an extreme political and social polarization, which is highly skewed against the imperial-colonial powers and the entire Argentine political class.

The Popular Uprisings

In a trip to Tucuman Province in April 2002, we visited the vast villas de miseria or slums and spoke to the multitude of poor and destitute: they told us that between 2001 and 2002, in just one year, the number of children suffering from malnutrition increased six fold. The combination of mass firings, inflation, and the cut off of food rations turned the poor into destitute, unable to meet even their basic food needs.

One week later, while meeting with a union delegate from the bank workers' union in Buenos Aires, we were informed that the banks were planning massive firings. One month later (May 19, 2002), a newspaper close to the financial elite, La Nacion, published a report that the banks were planning to fire two-thirds of their employees, 80,000 of the 120,000 and reduce the pay of their remaining staff.(45)

By early July the streets were noisy with demonstrators, crime was rampant, university professors with three positions (catedras) were making U.S. $200 a month, highways were blocked and the pot banging impoverished retires and former middle class were meeting to demand the ouster not only of the regime, but of the entire political class.

The deepening political polarization in Argentina has taken a variety of social and political forms: a national uprising overthrowing the De la Rua regime in December 19 and 20, 2001; the permanent rebellion in the provinces; the constant mass mobilizations of the unemployed (piqueteros) and the impoverished middle and working class neighborhood assemblies (caceroleros).

On December 19 and 20, 2001 hundreds of thousands of Argentines took to the streets to protest the government's declaration of a state of siege banning public demonstrations, the confiscation of U.S. $40 billion in savings, the deepening recession and 23% unemployment rate.(46) The uprising which finally forced President De la Rua to resign and exit from the Presidential palace via a helicopter was the culmination of a series of mass road blockages by the unemployed piqueteros, pot banging neighborhood marches and assemblies, provincial mobilizations and attacks on governors, mayors and federal officials. While each of the particular mass actions has its own specific social base, forms of direct action, and priority demands, they all converge in rejecting paying the foreign debt, the IMF austerity programs and the confiscation of savings.

The mass unemployed workers' movement, as I discussed elsewhere in greater detail,(47) was the detonator for the uprising of December 19/20, even if the organized unemployed were not a decisive force on the day of the ouster of the President. The unemployed workers' movement (MTD) has spread geographically throughout Argentina and escalated their struggle over the past six years as the recession has turned into a depression and millions of former unionized factory workers have been fired and become 'long term' unemployed. The MTD are organized territorially -- by barrio, municipality and more recently across municipalities, and in some cases competing national organizations. Their main tactics are to barricade major highways, blocking the transportation of goods, services and labor and from industries, banks and other sectors. Their demands invariably include sate financed jobs and food. They are usually autonomous from the main trade unions and political parties, though there are important exceptions. The MTD usually meet in assemblies in their neighborhoods to decide on tactics, demands and the distribution of jobs secured in successful struggles. By early 2002 over 200,000 unemployed workers were organized, though many more workers and underemployed participate in their street blockages and marches. The MTDs draw support from rank and file trade unionists, regional trade union leaders, particularly from the public employee workers' unions (ATE) and the dissident confederation (CTA) and the Marxist parties. The MTD clearly spearheaded the organization of opposition to the neo-liberal regime in the absence of any sustained opposition from the political parties and the official trade unions.

Road Blockages by Month (1997- 2001)(48)

1997........ 11

1998........ 4

1999........ 21

2000........ 42

2001*...... 64

*Jan.-May 2001.

From June 2001 to June 2002 the number of road blockages escalated ever further, merging and combining with other forms of struggle including the massive marches of the cacerolazos (middle class march of the pot bangers), citywide uprisings (puebladas), assaults of supermarkets in search of food and the national uprising of December 19/20, 2002 (especially December 20).

Several theoretical points emerge from an analysis of the MTD. First, the idea that the unemployed, outside the factories, cannot be organized because they are too dispersed, fragmented and without social leverage is false. The MTD demonstrates that their common social situation, the leadership from below rooted in former unionized workers working through popular assemblies in horizontal structures can succeed in organizing in the midst of a depression, despite the hostility and indifference of the entire trade union and political party leadership. The locus of collective social action has shifted from the factory to the street, especially as unemployment in the working class barrios has reached 40-60%, underemployment 20- 30% and hunger affects over one-third of working class school children.

The activist mass has become in large part "feminized" as women are in most cases the head of the household and taken the lead in organizing the barricades and the logistical support systems (roadside soup kitchens). Women from working class families bring to the MTD's the experience of two decades of neighborhood organizing, first via neighborhood reform schemes of the various regimes and over the past seven years through the autonomous militant MTDs.(49) The road blockages have evolved from sporadic, quasi-spontaneous actions into systematic, organized activities coordinated among thousands of unemployed. There were 51 road blockages in 1998, 252 in 1999, 514 in 2000 and nearly a thousand in 2001.(50) In 2002 the road blockages were often combined with generalized uprisings, particularly in the provinces of the interior, but also in the greater Buenos Aires region. In January 2002, for example, road blockages accompanied popular mobilizations in Cordoba, Santa Fe, Chaco, Misiones, Santiago del Estero, Salta and Formosa.(51) The combined struggles included both the demands of the MTDs and those of other protesting sectors, such as back pay for public employees, housing for the homeless, an end of the confiscation of savings, and food distribution. In some cases municipal buildings were sacked, supermarkets were raided and governor's mansions and state legislatures were occupied.

The sacking of retail stores can be differentiated according to the organizers and objectives. (1) Those organized by the ward bosses of the Peronist (Justice party), particularly before Dec. 19/20, 2001, to destabilize the Presidency of De la Rua, a leader of the Radical Party. (2) Those that were "spontaneously" organized by the destitute and famished poor. (3) Those organized or threatened by the MTD as a pressure to negotiate with the supermarkets to secure voluntary donations.(52)

The degree of organization and the work of the MTDs vary greatly throughout the country. The MTD in Matanza, led by D'Elia, has 25,000 affiliates, organized by barrio in the municipality of Matanza, a city of over one million residents. In Mosconi, Cutral-Co and Tartagal, former one-industry petroleum producing towns, the MTD is led and organized by former unionized, well-paid oil workers. In Mosconi an impressive set of small-scale workshops and micro enterprises have been established in place of the "make-work" state work plans, including bakeries, metal works, construction and other lines of work.

It is clear that the 'piqueteros' are not all what they appear to be, unemployed workers fighting for social justice. Particularly the Peronist party, now in power, has used the job subsidies to try to divide the MTDs, handing out job application forms via their barrio ward bosses and organizing thugs to disrupt local meetings. In addition, local Peronist bosses have hired unemployed to assault and intimidate assemblies in popular barrios, though they seldom attempt to threaten the MTDs.

In some municipalities, the MTDs have been gradually expanding but have had problems organizing small-scale production. In Solano, for example, membership has doubled to over 1200 members in one year.(53) Some projects like a local bakery, construction, metal works and garment shops have succeeded but home gardens have failed due to frequent flooding and lack of farm experience. The MTDs also face the problem of keeping up work discipline, especially among some sectors of the young unemployed who are militant in the barricades, but who have never experienced time clock punctuality and promptness in fulfilling job obligations, which causes dissention and conflict within the collectives.(54)

The MTDs are a potent force, although they are increasingly divided into conflicting and competing political-social organizations. The MTDs in Matanza, led by D'Elia and those influenced by the CCC (class-based coordinators) collaborate and negotiate with the Duhalde regime. Tactically they have sharply diluted the impact of road blockages by allowing 'alternative routes' in search of what they call a "poli-class alliance". These types of MTDs work closely with the dissident CTA labor confederation subordinating confrontation to negotiation. Both organizations did not participate in the mass uprising of December 19 and D'Elia opposed participation on the 20th. These MTDs are clearly reformist.

The radical MTDs are dispersed throughout the country and in the greater Buenos Aires region. They include Anibal Veron, Mosconi, Almirante Brown, Teresa Rodriguez, Solano and many others, including regional affiliates of the CCC who have retained a militant confrontational style of social action, total blockage of highways and autonomy from all the trade union confederations.

However, the radical MTDs are themselves internally divided along political lines, with the Trotskyist Workers Pole ("Polo Obrero"), the Communist 'Land and Liberation" (Tierra y Liberacion) and other formations competing for hegemony.(55) The result is that the radical MTD, at best have only tactical alliances while more often than not they are in conflict, even to the point of separate negotiations with the regime.

Despite the formidable growth and power of the MTDs, they have not realized their full potential. They have been successful in securing temporary survival assistance, but have not been able to develop into a force for a systemic transformation. In part this is due to the barriers imposed by the collaborationist trade union bureaucracy between the employed and unemployed workers and in part it is due to the competition and conflict among the MTDs. The MTDs do not have a recognized and accepted national leadership capable of organizing a national plan of struggle, which could coalesce with the popular assemblies, popular uprisings and dissident trade unions, particularly the public sector employees. When a mass popular uprising did take place in the capital, the MTDs neither led it nor provided the principal actors, though their previous years of escalating direct action created a favorable climate.

The Popular Uprising of December 19/20, 2002

The usually ubiquitous red flags and banners of the Marxist Left, dissident trade unions and piqueteros were almost completely absent when tens of thousands of Argentineans marched to the Plaza de Mayo facing the Presidential Palace, the Casa Rosada, on the hot summer afternoon of December 19, 2001. This was the beginning of a two-day uprising that ended the despised regime of De la Rua and his economic czar Cavallo and cost the lives of between 30 and 40 protesters and thousands of injuries and arrests.

The populace which filled the Plaza de Mayo included the Madres de Plaza de Mayo (a human rights group), young people, pensioners, progressive activists protesting the state of siege declared by the regime (banning public assemblies) and most significantly tens of thousands of downwardly mobile and impoverished pot banging middle class protesters. The centerpiece of the protest march was the "corralito", the regime decree confiscating or freezing all savings, time deposits and checking accounts of millions of Argentines, mostly from the middle class. The state of siege (estado de sitio) was the last straw. It was one thing to confiscate life-long savings, it was another to tell the victims to stay home and keep their mouths shut.

What began as neighborhood pot banging protests quickly took to the main avenues and quickly mushroomed into a massive loud but peaceful protest. The middle class saw the writing on the wall -- without savings nor access to their checking account, many without jobs or on the verge of losing their jobs, unable to pay home mortgages, school and health fees they were heading down toward the working class and beyond into poverty. For many it was their first initiation into mass street politics. They had believed fervently in Menem's promises of joining the first world; they spent and borrowed, visited the sparkling chic boutiques in the new malls, they were annoyed by or ignored the unemployed street blockages. Only the public employees, the white collar middle class, facing redundancies and, in the provinces, long delays in salary payments expressed any solidarity with the burgeoning mass movements. Then the recession set in 1999 and deepened in 2000, unemployment began to affect middle class businesses and the clientele of psychologists. Services fell off.

By 2001 the recession was turning into a depression, foreign financing was drying up and, with default on the horizon sectors of the upper and upper middle class began to withdraw funds followed belatedly by the middle and lower middle class. By late November, when the economy was collapsing the middle class made a run to withdraw their funds, only to be shut off, precisely at the moment when both major parties, the court system and the regime blocked their moves. Forced to rely on their own voice, they congregated aggressively in front of the banks, particularly the foreign banks, Bank of Boston, Citibank, Galicia, Scotia, trying to force entrance, angrily protesting their deception and expressing their political awakening. For over two decades the banks pillaged the country, its resources, its public treasury, as earnings from exorbitant interest earnings filled their coffers, while the middle class supported the bipartisan regime (Radicals/Peronists) that oversaw the pillage. Then it was the turn of the savings of the middle class. From complacent conformity to raucous eruptions in the streets, the middle class wanted access to their money. The banks and the regime became the targets of their wrath.(56)

Neighbors went to meetings to discuss their plight, to express their anger and solidarity. From informal neighborhood gatherings, they began to extend their horizons to the streets beyond the barrios to the main avenues, where they had witnessed the poor, the piqueteros march. They took to the streets and some took out their anger on bank teller machines, windows of banks were shattered. The streets were filling, the clatter of the pots grew louder, and more pot banging neighbors came down from the balconies of their apartments to the streets. They converged on December 19 in front of the Casa Rosada, ignored by the President, confronted by mounted police, engaged in an illegal demonstration. Figures on attendance varied upward from 100,000 to 200,000, but the significance was that the middle class was in front of the palace calling for the President's resignation. In fact, calling for the resignation or ouster of the whole political class (que se vayan todos). The police attacked with clubs, tear gas and live ammunition. Several protestors were killed, hundreds wounded, a peaceful protest march turned into a pitched battle, as the older protesters fled, young people fought back. Message workers on their motorbikes provided logistical and intelligence reports. Downtown Buenos Aires was a gas-filled, bloody battlefield of burning tires, of rock throwing street fighters and trigger-happy cops, reminiscent of the Palestinian intifada.

Not completely spontaneous nor minimally organized, the days and weeks of anger following the bank confiscation, the indignity of the deaf ear to public voices, the grotesque salaries and perks of the legislators ($12,000 U.S. per month plus bribes and pay-offs), it was all a huge provocation rupturing lifelong conformity and complacency and above all belief in the electoral system and the notion of representative government.

In the barrios, assemblies filled the neighborhood parks where public distrust became evident: the assemblies rejected leaders, fixed agendas, party labels (even of the left), everything was to be discussed and voted on, but frequently little was implemented.(57)

The absence of the Left on the first day of the uprising (December 19) can be attributed to several factors, both ideological and organizational.(58) Most of the left operated from a rigid class analysis from which it deduced political behavior. The left was generally "workerist", what didn't come out of the factories was suspect. This rigidity took the following logic: factory worker-unionization-revolutionary party- general strike-revolution. In the meantime, the unionized workers became a minority, most workers were un- and underemployed and many were organized in MTD. Belatedly the Left turned to organize, mobilize and fragment the MTD.

Likewise, the left missed the dynamics of class mobility: the rapid downward mobility of the middle class, its impoverishment and proletarianization. Having lost all their savings, the middle class had nothing to lose -- deeply alienated from their traditional conservative moorings. They were open to a radical democratic style of street politics and direct forms of assembly style democracy.

The left only moved into the uprising on the second day, December 20 and then only the activists and militants as the leaders remained in headquarters strategizing. On December 20, important contingents of public sector trade unionists, piqueteros, Marxist activists and tens of thousands of independent radicalized middle class people poured into the streets. Thousands of young people, from lower middle class students to young unemployed piqueteros joined the march and the eventual battles with the police in front of the Presidential Palace in Buenos Aires and in other major cities. The downwardly mobile middle class demonstration was the detonator of the mass and continual assault on power. Four governments in the rapid succession of 14 days came and went.

The uprising was successful on several important counts. The Saa regime declared that Argentina would not meet its debt obligations. The populace was able to force the resignation of four presidents. The uprising delegitimized the political class and the judicial system, exposing their venality and anti-national, anti-popular character.

The December 19-20 mass uprising was historically unique for several reasons: it was the first time in Argentine history that a popular uprising had overthrown a bankrupt elected or dictatorial leader. It was the first time in history that the majority of Argentines had confronted and rejected the entire political class. The uprising and the solidarity that ensued led to the creation of new and creative forms of direct popular representation in the form of barrio assemblies, and new tactics of struggle, pot banging demonstrations which were capable of blocking state decisions adversely affecting the people (such as the Duhalde regime's attempt to convert the confiscated savings into fixed bonds redeemable in ten years).

Following the selection of Duhalde as President by a cabal of Peronist party bosses and Governors and a few demagogic promises, the two official trade unions, the CGT and CGT (Moyano) backed his regime. The vast majority of the people were opposed from the beginning and increasingly so over time. Six months into the regime his support had withered to less then 10% and he faced a new wave of street blockages and general strikes.

The popular assemblies increasingly relied on the work commissions to implement policy changes as the Marxist sects began to penetrate, debate, argue over tactics, programs and party turf alienating many and recruiting few.(59) There was a temporary retrocession from the high point of December 2001.

The pot banging movement has demonstrated its capacity to veto presidential nominations and decrees. However its lack of a clear political focus and its diffuse organizational structure weakened its capacity to consolidate a powerful national movement. The internal warfare of the Left sects undermined the assemblies' attractiveness to many participants. Despite emerging weaknesses, the political experience and the sense of power has sustained an increasingly radical and growing current of opinion among the impoverished middle class. Public opinion polls on presidential candidates in late May 2002 favored a Marxist, Zamora, over any and all of the persona from the major parties.

Revolt in the Provinces

On April 17, shipyard workers from Ensenada (Province of Buenos Aires) stormed the governor's mansion demanding their back pay from the previous month. They were joined by public employees from their trade union (ATE) and teachers from their union (SUTEBA).(60) On the same day thousands of striking teachers in Cordoba marched on the state legislature, while thousands of trade unionists and piqueteros demonstrated in support of the unemployed occupying the labor offices demanding public works jobs.(61) Throughout Chubat province thousands of unemployed and trade unionists demonstrated in all the major cities for jobs and against budget cuts, while in Catamarca municipal workers were in the second day of a province wide strike demanding their back pay for March.(62) In San Juan, the public employees stormed the state legislature, battling the police, demanding their delayed salaries. On April 18, public employees and the unemployed in the provinces of Chubut and Jujuy confronted the police as they forced their way into the provincial legislature.(63) The demonstrators included bank workers, teachers, public employees demanding back pay and the unemployed demanding jobs. In Jujuy, in addition to attacking and partially destroying the legislature, they sacked a supermarket, attacked the headquarters of the ruling parties and the houses of two pro-regime politicians.(64)

The "provinces are burning" and the government is arming. The regime's Secretary of Security asked the state police (the Gendarmeria) to design a provincial police-training program to repress social conflict and solicited international "technical" support (including weapons and advisers).(65)

The rebellion in the provinces is deeply rooted in the liberal policies of the past quarter of a century, which have de-industrialized the provincial economies. Today there are few packinghouses in Argentina's third city, Rosario. Where the fathers were employed as meat cutters, the sons are unemployed. Their only experience cutting beef is a raid on an overturned truck carrying cattle to market, the only meat in their diet in many months, if not years.(66) De-industrialization is a result of privatization, lowering of trade barriers and the mass entry of cheap imports, as well as the trade barriers for beef and farm products in Europe and the U.S. The increase in costs of transport and power and the lack of regime investment in upgrading industries and promotion of new enterprises has also contributed to the demise of industry.

The massive lay-offs and high unemployment rates affecting Buenos Aires from the late 1990's to the present began a decade earlier in Rosario, Tucuman and other cities of the interior. The free market undermined the domestic producers in the provinces, while the short-term beneficiaries in Buenos Aires enjoyed the cheap imported consumer goods. The food, textile and consumer goods industries declined and the agro-export sector suffered from the subsidies and protection of European and U.S. producers. Moreover, the export enclaves in the provinces (oil, mining, agriculture) were capital intensive. They absorbed few workers. Privatization wiped out tens of thousands of jobs, particularly in the petroleum industry, as the new foreign owners closed down operations in the provinces, turning the few enclaves in provinces like Neuquen into centers of unemployment and social explosions. The regime promise to create alternative employment for the workers displaced from the privatized enterprises never materialized.

Individual income declined, as business bankruptcies multiplied. Inter-provincial trade declined due to transport cutbacks by the privatized airlines and railroads, while road transport costs rose due to higher tolls by the private owners.

The provincial governments' budget revenues declined precipitously, while their fixed costs rose due to the social crisis. To bridge the widening deficit and avoid social explosions, the provincial governments increasingly turned to federal funding and printing local currencies. The provincial public sector expanded in non-productive services while the productive sector declined. The public sector became the employer of first and last resort. The dominant political parties and provincial party bosses stole tens of million of pesos from the local and federal government, siphoned earnings from provincial enterprises and financed extensive electoral party machines, thus perpetuating themselves in power via jobs for some, while running down the economy and impoverishing the many excluded from the spoils of office.

The leading IFI (World Bank, IMF, IDB) did not complain as the corrupt provincial political bosses backed President Menem and his liberal agenda, while enforcing and implementing the privatization process in their own provinces. Living on federal handouts, which reinforced the social and regional inequalities, was a form of counter-insurgency. When popular rebellions intensified, the corrupt provincial governors and legislators would secure a loan or aid package from the federal government to pay back salaries or create make work jobs.

When the recession and then the depression hit the country, particularly Buenos Aires and the federal government, the funds to the provinces declined. Local governors printed their own currencies redeemable and recognized only within their jurisdiction, limiting inter-provincial transactions, transport, mobility and travel. With the end of public assets to privatize in order to secure new financing from the IFI's, the federal government was forced to accept drastic cuts in aid to the provincial governments. With debt default, the IFIs demanded that the federal government impose tight fiscal restraints on the near bankrupt provincial governments and the elimination of local currencies, thus provoking massive firings, bankruptcies and immense growth in poverty.

The provinces rebelled. As the Financial Times noted, "With poverty levels rising daily and cash strapped provincial governments unable to pay workers and offer handouts to the poor, there are fears of a new wave of violence".(67) One week later a massive one-day general strike was in force. Class political conflict intensified throughout 2002. The end result of the logic of privatization and liberalization of markets was a generalized political rebellion spreading from province to province and moving to the center of Buenos Aires and the seats of political and financial power.

The provincial rebellions are much akin to popular uprisings, as they incorporate a wide variety of social strata in the same mass mobilizations: public employees, schoolteachers, unemployed workers, unpaid industrial workers. The hard and fast line between bureaucratically led trade unions, popular assemblies and the MTD (unemployed workers) that operates in the capital is blurred in the provinces. There, more often than not, the ATE and teachers' union engage in joint actions with unemployed workers supporting the demands for back pay for the employed and state funded jobs for the unemployed. The social distance between the leaders/followers of provincial trade unions is shorter. Many families include both public employees and unemployed. The class struggle is mainly against the state, the neo-liberal state, though the demands for an alternative are nebulous. Many rebellions have been ended by the return of the patronage state, paying a back salary here, creating a few jobs there. By 2002, however, the ability of the "patronage state" to temporarily end rebellions was extremely limited, precisely as incomes declined and unemployment reached 30-40%in the cities and 60-70% in the villas.

The result was the "puebladas" -- whole cities rose in rebellion, seizing public buildings and blocking highways and holding legislators hostage. The cycle of radical action followed by the election of conservative politicians is changing. The period of popular mobilizations is extending and the levels of action are intensifying while the electoral politicians, without patronage, are totally discredited. The collective action in the street is more representative of the interests and attitudes of the people than the sitting governors and legislators. The puebladas create a kind of short-term "dual power" in governance, which, however, has not found the manner to institutionalize itself.

The deepening crisis has homogenized vast sectors of the population: professionals have seen their income decline by two-thirds, public employees have not been paid in months (salaries reduced by 70%), and their savings have been confiscated. The puebladas are a clear expression of the growing homogenization of social classes, their common social situation. The joint action and solidarity between employees, professionals and unemployed embodies this decline in socio-economic distinctions.

While provincial social rebellions are more frequent, intense and inclusive, and even while they occur at the same moment in time, they are not coordinated, and do not have an agreed-upon interprovincial leadership and alternative economic program. The tactics are "offensive"; the demands are "defensive". Only in a few instances has the working class taken the initiative to create alternative patterns of ownership and social relations.

Worker Takeovers: Brukmann and Zanon

The powerful piquetero movement of the unemployed, the widespread neighborhood based assemblies, the uprising of December 19/20, 2001 and the general strike of May 29, 2002 point to massive opposition to neo-liberal regimes, their policies and leaders. Equally important, these collective mass activities demand profound changes in domestic and foreign economic policies and relations with the foreign banks, the IFI, Washington and the G-7. There has not been a clear definition of a radical political-economic alternative at the national level. However, at the local level two examples indicate the revolutionary alternative -- a transformation in property and social relations: the worker occupation and operation of several factories. The best known took place in Neuquen at the Zanon ceramic plant, and the other in Buenos Aires at the Brukmann garment factory. Both worker run factories point to an alternative to plant closings, subsistence public make-work and soup kitchens.

During the first half of the year 2002, plant closings multiplied and the firing of workers accelerated: in January 1000 workers a day; in February 2000 a day, in March over 65,000 were out in the street.(68) Several factories threatened with closings were occupied by workers to prevent further firings and the sell off of machinery. The owners, aided by collaborationist trade union bureaucrats, proceeded to obtain court orders of eviction, and police were sent to the premises to dislodge the workers. The workers' occupation followed a specific sequence.(69) First, the workers in the factories voted to replace the factory delegates beholden to the union bureaucrats, with elected militant representatives who responded to factory based assemblies. They then proceeded to vote out of power the employer collaborators in the local union. With new leadership and decisions taken by general assemblies in the factories, the workers voted to resist plant closures, by occupying and operating the factory. The worker operated factories and the new unions secured support from the popular assemblies in the city, from local trade union activists, university students and, above all, from the MTD. Faced with threats of dislodgement, the worker assemblies called on their allies in the neighborhood organizations and MTD to confront the police. Faced with mass resistance from a wide array of determined organizations, the police withdrew.

The worker-operated factories have secured technical advice from universities and administrative personnel from the factory. But the main organizational innovation has been the establishment of commissions to deal with supplies and sales, health and solidarity and other areas as challenges emerge. In the Zanon ceramic factory, the ex-owners pressured suppliers to cut off the sale of inputs -- thus reducing production from 80% to 25% of capacity between February and March 2002.(70) Since then the worker commission has moved to re-establish supply networks.

The workers in Zanon and Brukmann do not see the occupation of isolated factories as the solution, given the general crisis, and the high level of unemployment. They support a generalized offensive by workers to occupy factories and demand public ownership under workers' control -- socialism. The experiences in Brukmann and Zanon have received national attention and have become points of reference for other workers facing plant closings. But the first step toward any social transformation resides in establishing assembly based, democratically elected factory representatives and union leaders who respond to the factory assemblies. In all the struggles to prevent plant closings the national trade union confederations and their local representatives have been major obstacles to factory occupations. The examples of Zanon and Brukmann indicate that the ouster of current bureaucratic elites is the first step in the successful confrontation with the factory owners and the state. The factory occupations are seen by the new democratic leadership as the first step toward a national transformation, thus their support for the demands of the MTD: for "genuine employment" at livable union salaries, in productive socially necessary employment (building schools, hospitals, low cost housing, articles of popular consumption). The worker operated factories are based on class organization in the workplace by and for workers; the success of their class struggle perspective is in sharp contrast to the collaborationist approach of the national bureaucrats who have failed to stem the mass lay-offs and who have explicit or implicit accords with the regime in the hopes of securing make work for the unemployed or simply to protect their salaries and perquisites.

While the scope of the worker factory takeover movement is limited and lacks the numbers involved in the other forms of mass mobilizations, it is certainly the most significant in pointing to a powerful alternative social system, and a democratic alternative to the corrupt, elite driven electoral system which has led Argentina down the road to disintegration.

Alternatives: Plan Phoenix or Plan Prometheus

In light of the complete and total collapse of the Argentine neo-liberal model, several alternative models of development have emerged. One of them, Plan Phoenix (PP), put forth by over 100 economists and political scientists, is the most widely circulated and influential in intellectual circles.(71) The other, which we can call Plan Prometheus, is articulated within the emerging revolutionary democratic organizations.

PP is both a critical diagnosis of neo-liberal policies and a prescription for change and development. The critical diagnosis covers a wide range of areas of economic policy, from tax policies, public spending, ALCA and MERCOSUR to privatization and technology policy.(72) While most analysts are critical of neo-liberal policies, some are more so than others. Azpiazu and Basualdo, for example, are more critical of the structures of economic power than Katz and Stumpo, who are fairly orthodox liberals.(73) PP's main virtues are found in its criticism of the total deregulation of the economy, the indiscriminant opening to the world market, the unilateral and radical reduction of tariff barriers (without reciprocity), the loss of control over monetary policy via the de facto dollarization, the dismantling of the state as an instrument of economic policy, the great concentration of economic power and the lack of transparency in the privatization of public enterprise. PP's rejection of globalization ideologues' argument that the nation-sate is no longer a viable tool for policy making is part of a new project to revitalize the role of the state in pursuit of an industrial policy which prioritizes development of the internal market and international competitiveness.(74)

In the areas of reforms, PP focuses on securing reductions in debt payments via a moratorium or reduced payments -- the document is contradictory. In any case its moderate proposals have been by-passed by subsequent events, since three months after PP was published the government defaulted. The PP favors increased taxes on the rich, the financial groups and other "non-productive" sectors, and elimination of subsidies to privileged classes. The revenues raised would be channeled toward employment generating investments in socially useful areas (schools, low income housing, child care centers), as well as worker training programs. The basic premise of the PP document is that a coalition of political parties, productive private sectors, and civil society would be the political bases for a new regulatory regime.(75) The state would direct financial capital to fund productive capitalism, foreign capital to reinvest profits in the national economy, and productive capital to invest capital in socially useful activities. PP seeks to devise an economic policy to "reorient capital" toward the domestic market, regional (re-)industrialization and processing of raw materials to generate more value added to exports in the international market. The priority of the PP would be to develop a national plan of development to reactivate the economy, fix social priorities, selectively protect local producers, seek sources of domestic funding and then negotiate with the IFI, including the(76) IMF. The focus would be on internal transformation and the role of the national state, not on external agreements with the IFI.

The PP proposes to "reprogram debt payments" to secure a "grace period" via negotiation with the IFI and to secure credits from the G-7 to develop a welfare state, based on state regulated private economy. Citing examples from Western Europe in the 1960's and early 1970's, the PP believed that a welfare state and capitalism are compatible. The social coalition to carry out their policies, resembles the same components of the "national-popular" alliance of the 1940's and 1950's.(77)

The PP contains an informed critique of several sectors of the economy with a totally out of date conception of the socio-political economic realities, particularly the behavior, interests and orientation of social classes, political parties, foreign banks and the IFIs.

As one of the contributors to the PP, Alfredo Garcia pointed out, "On the political framework, any economic proposals has validity only if there is a social force capable of instrumentalizing it."(78)

The PP is basically a neo-structuralist plan that accepts the privatization process, the distribution of property and existing social relations of production. (79) The existing owners of banks, factories, telecommunications, real estate, land and minerals are not at all called into question. The basic reform is to insert the state to regulate their behavior, reduce the excesses of the market, increase taxes and convince them to increase their contribution toward industrial investments, domestic consumption and social welfare.

There are several problems with the regulatory policies. The dominant capitalist and financial classes have evaded and resisted any attempts to "reorient" them because they are tied to international circuits. Previous attempts at regulation led to massive capital flight -- as was seen precisely when PP was published -- though the two events were not directly connected. Regulation presumes that there is a viable economy in place, which Argentina is not, at this time. PP is published in the midst of a depression. When the economy is regressing at -15%, per year and incomes fall by over 60%, to propose to "regulate" in the context of rising rates of bankruptcy makes no sense. The issue of state intervention involves massive direct public investments in a public sector, which can only come about via the re- socialization and nationalization of strategic economic sectors.

Social welfare measures and public investments cannot be financed through additional taxes when the investors have either sent their earnings abroad and incomes and profits are dropping. When the Duhalde regime attempted to "retain" earnings from the agro-export sector, the latter organized a production boycott, causing the regime to back off.

The proposals put forth by the PP totally underestimate the scope and depth of the Argentine crisis -- the disintegration of the economy and society. Proposing policy palliatives at a time when the whole private productive-financial-distributive system is breaking down is totally adequate to restart the economy.

PP assumptions that the IFI and the private banks will cooperate in reducing profits (via taxation) and lower their overseas remittances to the home office, flies in the face of the practical realities. The private banks withdrew massive amounts of earnings and depositor savings and have resisted refinancing their subsidiaries throughout 2000-2002, behavior hardly compatible with paying higher taxes, reinvesting profits in Argentina and expanding welfare. On the latter point, the foreign banks proposed restructuring includes saddling the state with their deposit liabilities, firing up to 2/3 of their workforce, reducing the number of subsidiaries and, in some cases, closing and withdrawing from the country, as was the case with Scotia Bank and several others.

The IFI's refusal to fund or extend credit to Argentina for not making more liberal concessions and cutbacks is hardly a sign that they would "negotiate new credits and refinancing" to a regime that adds taxes to foreign bank transactions, limits profit remittances and "orients" banks to lend to Argentine productive sectors, producing for the domestic market, as the PP proposes.

The PP underestimates the links between the IFI and foreign capital in the context of the 1990's. Their extrapolation of the European welfare state of the 1960s, when labor was strong, Communism was an alternative, capitalism was expanding and finance capital was subordinated to industrial capital, is a gross misunderstanding of the present global and national context. Capital is linked to international markets and profoundly hostile to the entire welfare state – everywhere. Trade union bureaucracies have little influence and national-popular political parties are no longer in existence.

The PP extrapolation fails to realize that today, Euro-U.S. capitalism cannot be "regulated" -- it disinvests, it moves, it organizes resistance; it destabilizes to avoid regulation, welfare and progressive taxes. The issue is to nationalize capital in order to regulate it -- to change the character of property relations in order to reallocate investments, invest in the local economy, and finance social welfare and infrastructure.

Yet the major failing of the PP document is its total dependence on the state to stimulate, collaborate and encourage "private agents": subsidizing the private sector (to create jobs), working with foreign capital to reinvest profits, regulating the behavior of privatized firms to correct excess charges, and poor service, etc. The critique of ALCA runs along the same line: ALCA is criticized because of U.S. tariff barriers and subsidies, rather than the structural inequalities between the productive sectors of the giant MNCs in the North and Argentina's industrial sectors. The PP criticism, even if it were accepted by the U.S. (extremely unlikely as the Bush Administration increased subsidies to agriculture), might increase some agricultural exports but continue to prejudice local industrial and IT producers. Equally problematic is the kind of state that the PP proposes. The problem is not only the incompetence and nepotism and corruption -- certainly serious problems as Oszlak correctly notes,(80) but the political composition of the state and beyond, the entire political class.

Following the collapse of the Argentine economy, the entire political class has been discredited, including all the parties that the PP proposes as components of its "new social coalition". The PP proposed "coalition of productive forces" lacks realism - - employers are firing workers, reducing hours, lowering pay, hiring temporary workers, closing factories and moving to new sites (in and out of the country), transferring their capital to other sectors or out of the country. The workers are occupying factories; the unemployed are blocking highways and seizing municipal buildings, and even rising to overthrow Presidents. This reality makes the proposed "social coalition" enviable -- the level and intensity of social conflict, the fierce competition over scarce resources has broken all links between capital and labor. The "national producers" have shown no propensity to finance welfare programs -- except their own survival and flight.

The poli-class bases for a mixed welfare economy have not materialized over the past 20 years of electoral politics. On the contrary, every victorious electoral coalition (Alfonsin, Menem, the Alianza) over the past 2 decades has been based on a national-popular coalition and when in power implemented harsh neo-liberal policies, following the direction indicated by the leading entrepreneurial and financial groups.

The small and medium size producers of the interior and in Buenos Aires can play a role but certainly not in terms of exports, financing and large-scale, long-term job creation in the present context.(81) The highest rates of bankruptcy are precisely in this sector and they are paying the lowest salaries and provide the least social coverage for workers. The PYMES are hardly model employers from the workers' standpoint.

The danger of the PP is that it fails to understand or even mention the problems of confrontation with U.S. imperialism. (82) Debt default is a reality today and the U.S. Treasury and the G-7 have issued an ultimatum: pay up, cut back, fire workers, and end provincial deficits or else a credit/finance blockade. There is no strategy or understanding in the PP document of how to deal with a global political confrontation. Oblivious to Euro-U.S. economic (and military) aggression, the authors act as if it is a question of making reforms at the national level and negotiating at the international. But it is precisely the reforms at the national level -- even incremental changes -- that are not acceptable to the U.S. and Europe, for fear of the contagion effect that successful reforms will have on adjoining countries.

The PP document is dissociated from the powerful social movements and political uprisings that have occurred. They are not even mentioned in passing. The organized unemployed, the popular assemblies, the factory takeover movements, the provincial rebellions all of whom have the most direct stake in the welfare, development and employment goals of the PP are ignored. Instead, the PP looks to the discredited trade union bureaucrats of the confederations, the political parties and leaders who have been the main cause of the disaster to reenact a new national- popular coalition with foreign capital and credit from the IFI's.

Following the political and social logic of the PP means that any regime that emerges will be pressured by its own private economic agents to discard the welfare provisions, and national regulations, to secure minimum cooperation for production. Internal hegemony would revert to the "private agents" and the welfare programs would be subordinated to maximizing short-term profits.

If, on the other hand, the "social forces" of the coalition gain ascendancy, the "private economic agents" would likely ally with foreign capital and the G-7 to destabilize the regime and provoke intensified social conflict, leading to political instability favorable to the Right.

Given the non-viability of the regulatory reform program of the PP in the Argentine and global context of today, the choice is a reversion to a bankrupt neo- liberal policy or revolutionary change which incorporates the welfare reforms of the PP to a realistic socialized economic structure supported by its principal beneficiaries.

Plan Prometheus: The Revolutionary Alternative

First and foremost is the need for a new social coalition of the 80% of Argentines suffering a severe decline in living standards, including the 55% below the poverty line. Employed and unemployed workers alone amount to close to 50% and the impoverished middle class includes another 20-30%. This is a broad based coalition, which is not linked to overseas banks. They are sworn enemies for having confiscated their savings. This gives the socialist state the social basis to re- nationalize the banking and financial system and provides a political base to resist pressures from the G-7 bankers. The nationalization of foreign trade would provide the state with a mechanism for reorienting foreign exchange to finance public investment and national industrialization. The re-nationalization of petroleum would provide income and revenues to stimulate job training, infrastructure and social projects generating employment. Progressive taxes and tax collection can be enforced by threats to expropriate the property of tax evaders and tax delinquents.

The state reforms proposed by the PP document should be articulated with new assembly forms of popular representation and the incorporation of the new social movements (piqueteros) in local and municipal governments. Popular assemblies should exercise direct control of budget allocations and expenditures, an advanced form of participatory budget. The ownership of strategic sectors of the economy is essential to sustain re-distributive policies, as the recent decades attest. With privatization the inequalities widened, the power over decision of macro-economic policies was monopolized by powerful economic groups.

The economic crisis has cut per capita income by two-thirds. Given the scarce resources and the disintegrating productive base, only the public takeover under workers' control can expand the material base and generate greater equality. Greater equity depends on social control of the income to be distributed. Social ownership is at the center of Plan Prometheus. It combines the tax and expenditures of the PP but within a vastly expanded social property sector, democratically controlled by the direct producers and administered by a meritocratic public administration. Promethean because it involves the total reconstruction of a disintegrating economy with a shattered social fabric in the face of powerful U.S.-Euro imperial adversaries. Having control over the basic economic sectors, however, means the return and reinvestment of earnings in Argentina. Debt default means the savings of over 50% of export earnings. The diversification of production and the reactivation of the economy means that optimal use can be made of existing unused capacity -- over 50% of the total. MERCOSUR, China, the Arab countries and sectors of the E.U. and Russia offer alternative markets to any IFI organized boycott. Public investments in innovation, technology, research and development can incorporate Argentina's highly trained but currently underutilized labor force. The re-activization of internal markets and selective protection of provincial producers can expand markets. Public investments in infrastructure can employ the unemployed and facilitate inter-provincial and inter- MERCOSUR trade.

Plan Prometheus incorporates the criticism of Plan Phoenix and extends them from modifying the behavior of the private actors to transforming their structural position. Prometheus incorporates some of the specific welfare reforms of PP but locates them in a more realistic political-economic property framework that avoids the constraints and threats of private/foreign non-cooperation. Prometheus replaces PP proposed national-popular social coalition, with a more realistic popular coalition rooted in the real existing social movements and their interests.



Notes

1- World Bank Annual Report (quotes)

2- Jose Luis Romero and Luis Alberto Romero, Buenos Aires: Historia de Cuatro Siglos (Buenos Aires: Altamira 2000) esp Jorge Schvarzer "La Implantacion Industrial", pp. 209-226.

3- United Nations Economic Commission for Latin America 1992 and 2000. Clarin, June 10, 20002. The Argentine government formally recognized that 51.4% of the population, 18.2 million are below the poverty line.

4- Cited in La Nacion, March 17, 2002, p. 3.

5- Calculated from table La Nacion Ibid.

6- La Nacion Ibid.

7- La Nacion Ibid.

8- Ibid.

9- Clarin, March 31, 2002, p.10.

10- Clarin Ibid.

11- See Clarin, April 20, 2002, p. 7, Javier Llorens and Marion Cafiero, Por que se Quiere Derogar La Ley de Subversion Economica (Mimeo 2002).

12- Clarin, April 18, 2002, p. 11.

13- Ibid.

14- Ibid.

15- Ibid.

16- Eduardo Basualdo and Claudio Lozano, "Entre la dolarizacion y la devaluacion: La crises de la convertibilidad en la Argentina", Realidad Economica, No. 73, 2000, pp. 60-66.

17- Financial Times, August 23, 2001, p. 12.

18- See Llorens and Cafiero, op cit.

19- Ibid.

20- Ibid.

21- Ibid.

22- Ibid.

23- Ibid.

24- Eduardo Basualdo, Concentracion y centralizacion del Capital en la Argentina durante la decada del noventa (Buenos Aires: Universidad de Quilmes, 2001).

25- See Horacio Verbitsky on the depth and scope of corruption. On the gross increase in upper class corruption see Jose Sbattella, "El Excedente economico en la Republic Argentina", Realidad Economico, No. 181, pp. 75-90 especially page 86.

26- Daniel Azpiaza and Martin Schorr "Desnaturalizacion de la regulacion publica y ganancias extraordinarias", Realidad Economica, No. 184, pp. 73-95.

27- Basualdo, op cit.

28- See Basualdo and Azpiazu, El proceso de privatizacion en Argentina, (Buenos Aires Pagina 12, April 2002).

29- Daniel Azipiazu et al Privatizaciones en la Argentina, Penegociacion permanente, consolidacion de privilegios ganancias extraordinarias y captur institucional (Buenos Aires FLACSO December 2001).

30- Ibid.

31- Financial Times, May 14, 2002, p. 5.

32- Pagina 12, April 14, 2002, p. 6-7.

33- Ibid.

34- Clarin, April 18, 2002, p. 8.

35- Ibid.

36- Ibid.

37- Clarin, April 21, 2002, p. 6.

38- Ibid.

39- Pagina 12, April 21, 2002, p. 2.

40- Ibid.

41- Ibid.

42- Pagina 12, April 21, 2002, p. 3.

43- Ibid.

44- See James Petras and Henry Veltmeyer, Globalization Unmasked: Imperialism in the 21st Century (Zed: London, Fernwood, Halifax, NS 2001)especially ch. 4.

45- Interview Mario Xiques, bank worker, trade union delegate, May 10, 2002.

46- El Pikete, Year 2, No. 6 (published by MTD Solano), Interview with SIMECA (messager motorcyclists April 20, 2002); Eduardo Lucita "La rebelión popular en Argentina", December 25, 2001 (email). Argentina: La nueva rebelión Porteña (December 28, 2001) Resumen 12/29/01. Interview Mario Xiques April 10, 2002, Buenos Aires.

47- James Petras "Community Organizing: Unemployed Workers' Movement in Argentina", Social Policy, Spring 2002, Vol. 32, No. 3, pp. 10-15, Luis Oviedo, Una historia del movimiento piquetero (Edicion Rumbos Buenos Aires, 2001).

48- Clarin, June 24, 2001, p. 6-7. See also Luis Oviedo "Piqueteros", op cit.

for a good chronology.

49- Ibid, June 24, 2001, p. 6-7.

50- Ibid, June 24, 2001, p. 6-7.

51- Quebracho, Year 5, No. 31, p. 4.

52- El Pikete, Year 2, No. 6, p. 2.

53- Interviews in Solano with Padre Alberto, April 21, 2002.

54- Ibid, See also Brecha, April 12, 2002, p. IX.

55- Pagina 12, January 16, 2002.

56- For background on recent social protests prior to the uprising of December 19/20, 2001. See Observatorio Social de America Latina, Sept. 2001. For detailed accounts of the neighborhood assemblies see Argentina Arde, from Feb. 2002 forward; Asamblea Popular Parque Lezama, Jan. 1, 2002 forward through no. 11.

57- Interviews with participants in Parque Centenario in April 2002. See also Argentina Arde, Year 1, No. 3, Feb. 15, 2002.

58- Interviews with Hebe Bonafini April 11, 2002, Motoqueristas, April 19, 2002.

59- Argentina Arde, Feb. 2002, March 2002, April 2002.

60- Clarin, April 18, 2002, p. 18.

61- Clarin, Ibid.

62- Clarin, April 19, 2002, p. 22.

63- Clarin, April 19, 2002, p. 22.

64- Ibid.

65- Ibid.

66- Clarin, March 29, 2002, p. 34.

67- Financial Times, May 22, 2002, p. 6.

68- "Declaración del Encuentro del 13 de Abril Frente a Brukman Confecciones" leaflet issued by workers of Brukman and Zanon April 13, 2002.

69- Ibid.

70- "Zanon: Una fabrica tomada donde sus trabajadores estan produciendo algo mas que ceramica" interviews by Juan Carlos Cena of 3 leaders of Zanon (Raul Godoy, Carlos Acuna, Alejandro Lopez) to be published in Maza, No. 3, July-August 2002.

71- Plan Fenix was published in its entirety in Enoikos, No. 19, November 2001, its was written in September 2001.

72- The essays are individually authored and reflect the various specializations of each economist.

73- See Daniel Azpiazu and Eduardo Basualdo, "Concentracion economico y regulacion de los servicios publicos", pp. 180-193: Jorge Katz and Giovanni Stumpo, "Produccion tecnologico y competitividad internacional", pp. 150-163.

74- See "Hacia el Plan Fenix, Diagnoslico y propriestas Documento Final", pp. 19-29 in Enoikos, op. cit.

75- Op. cit., p. 29.

76- Op. cit., p. 24.

77- Ruben Berenblum, "La refundacion nacional. Hacia una nueva coalicion social" op. cit. pp. 144-148.

78- Alfredo Garcia "Politica monetaria y crediticia", op. cit. pp. 102-109.

79- Quotes from neo-structuralist school.

80- Oscar Oszlak, "Estado y sociedad: nuevas fronteras y reglas de juego", op. cit., pp. 164-179.

81- See Jorge Shvarzer, "Politica production para un sociedad equitativa y dinamica", op. cit., pp. 56-65.

82- The U.S. and IMF intervention was flagrant up to and after the Fenix document was published and yet not one writer adequately discusses the problem. On the role of U.S. intervention and a critique of Latin American intellectuals in this issue James Petras Globaloney (Editorial Antidoto: Buenos Aires 2000).