Last week, the US Supreme Court made a decision that could force Argentina to pay American billionaire hedge fund managers the full value of its decade-old debts. Argentina’s dollar denominated/pegged debt is one of many cruel legacies of the Washington consensus government under Carlos Menem. Menem was known for being buddy-buddy with Bill Clinton, and excluded the same sort of chill machismo as Clinton, while turning his country into an internationally financed Ponzi scheme. In the 90’s, he was lauded as a hero of fiscal discipline and inflation control, but his real achievement was severely eroding Argentina’s sovereignty and allowing it to become a petri dish for reckless neoliberalism. As poorly managed as Argentina had been before the neoliberal experiment, it should now be clear that establishing a currency board and pegging the peso to the US dollar was a disastrous “solution.”
The current Kirchner government is also deeply flawed, and I have trouble finding anything positive to say about the leadership of my second home country. This government has continually lied about inflation statistics and violated freedom of the press. That being said, Argentina has been struggling for years to build up its dollar reserves by exporting an enormous amount of its agricultural production, at the cost of increased food prices for the poor. Argentina has also seen millions of acres of its virgin land transformed into soybean farms, with all the environmental consequences from the herbicides and fertilizers that go along with it. Meanwhile, the US refuses to allow imports of Argentina’s higher valued agricultural goods, such as meat and citrus, due to grossly outdated health and safety measures that masquerade as protectionism for America’s welfare farmers. On the one hand, US policy is forcing Argentina to pay back debts in dollars, and on the other hand, US policy is making it difficult for Argentina to actually acquire those dollars! Along with the current disaster in Iraq, it’s hard to see how our current leadership could do a better job of turning the entire world against the US.
The recent series of decisions from our neo-con court system may force Argentina to pay back these illegitimate debts, which could drain billions of its hard earned dollar reserves. This is crony capitalism of the worst kind; investors like Paul Singer are using America’s court system to force the sovereign government of Argentina back into client-state status. The already unstable Argentine peso, which has caused some farmers to start reverting to commodity currency, could fall even further as the result of this decision. In the purest sense, it’s hard to see how human welfare, except for the top 0.001%, will improve as a result of this decision.