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Milei's economic plan is kaput: Where is the government going? Last month already saw a rise in official inflation figures, from February's 2.4 percent to 3.7 percent. These pressures provoked a year-over-year drop in the consumption of basic foodstuffs by 4.5 percent in March, a reflection of the deepening poverty gripping the working class and unemployed. These moves are a 180-degree turn from the government’s previous policy of maintaining currency controls to suppress inflation. They come after Caputo and Milei had been insisting for weeks, against the prognoses of all conventional bourgeois economists, that there was going to be no change in the exchange rate and that the peso wasn’t overvalued. Finally, the government threw in the towel in order to receive a bailout from the IMF. What we saw was an attempt to soften the landing as their model ran out of steam, and avoid a catastrophic collapse. They are attempting to implement a ‘controlled failure’, hoping to reach at least the elections in October. But these measures won’t solve their problems; they will only postpone their consequences. Increasing indebtedness will aggravate the state’s insolvency when the debts come due in four years. But that is far from Milei's mind, as it is a toss-up as to whether he can maintain stability until October even with the loan. ‘Controlling’ the collapse The days before the measures were announced saw a run on the peso, which forced the Central Bank to sell hundreds of millions of reserve dollars, yet again, to prop up its value. Reserves have remained in negative territory, and fell more than US$3 billion in three weeks. For this reason, the government at the head of this financial casino has just agreed to greater subservience to the IMF, seeking to prevent the lack of dollars from causing losses to private creditors, who are amassing fortunes with the carry-trade, and to avoid an uncontrolled devaluation that will transfer to domestic prices. An uncontrolled devaluation would also have a direct impact on the public debt issued in pesos but indexed to the dollar, which would multiply the cost of servicing (repaying) the public debt. This would make it practically impossible to continue presenting a ‘balanced budget’, which the government prioritises above all. The devaluation of the peso, which became increasingly inevitable with each passing day, reflects the resounding fiasco of an economic model based on budget cuts and speculation. The government stuck to an outdated scheme, trying to artificially maintain a strong peso by selling dollars at a parallel exchange rate to curb inflation at the cost of further impoverishing the working class and the most vulnerable sectors. With its "fiscal anchor" (cuts in subsidies and social expenses) and its "exchange rate anchor" (cuts in the issuance of bonds and debt taking, and financial instruments to take pesos out of the economy), Milei's model sought to stabilise the country through financial manoeuvres. But reality proved too strong: the devaluation shows the inefficiency of a plan that has just collapsed. Without reserves in the Central Bank, maintaining the official exchange rate became unfeasible, and with the economy in recession, further fiscal austerity ceased to be socially and politically sustainable. The only way out was increased indebtedness and reliance on the IMF. The IMF, however, insists that the US$20 billion gift to the Central Bank be used to pay off foreign debt maturities, not to bail out investment funds which have holdings in pesos by letting them cash out at an artificially strong peso exchange rate. The latter happens to be just what Luis Caputo did when he was president of the Central Bank in 2018, shelling out IMF dollars to his friends during the Macri government! It is the same old script: guarantee the profits of finance capital and sink the working class even more into destitution. Domingo Cavallo himself – a functionary of the military dictatorship in the 1980s and later Minister of Economy under Menem and de la Rua – came out to warn about the consequences of the “use of reserves that belong to dollar depositors in the banking system to intervene so much in the foreign exchange market”. Thus, Cavallo warned from his blog, the run on the peso could be transformed into a run on the banks. Global storm, local crisis All this is happening not only in a midterm election year, but in a context of economic instability internationally, which is contributing to the brewing struggles and mobilisations in Argentina. These struggles have been increasing in force since the beginning of the year, despite the passivity of the political and trade union leaders of the working class. The government of Milei is under siege on all fronts: economic, political and social. A perfect storm is brewing. The intensification of the international trade conflict provoked by Trump's tariffs marks a new, turbulent phase and a deepening of the capitalist crisis that has loomed over the world economy since 2008. The symptoms of the capitalist crisis are everywhere in sight. The process of globalisation has blown up. No one, not even the most powerful imperialist powers, can overcome the limits which private ownership of the means of production and the straitjacket of the nation state place on the productive forces. The intensification of the international trade conflict provoked by Trump's tariffs marks a new, turbulent phase and a deepening of the capitalist crisis that has loomed over the world economy since 2008 / Image: Own work The idea of the bourgeois economists, repeated ad nauseam, that the expansion of world trade and the international division of labour had overcome the contradictions of capitalism, has proved, as the Marxists said, a farce. In recent months, it has become clear that this process has reached its peak and is receding, while the imperialist countries, led by the US, adopt protectionism. The spectre of a new recession and even the prospect of a global depression threatens to break the unstable equilibrium, intensifying the class struggle. This economic, financial, social, political, diplomatic, and military instability is having important repercussions in Argentina, a country of backward capitalism. Here the landowning oligarchy and the owners of the banks, factories, of life itself, despite their internal discussions and conflicting interests, use bandits of the likes of Milei to unload the crisis, which they themselves caused, on our backs. While markets sank across the globe in the wake of Trump’s tariffs, Argentine assets were among the hardest hit, with drops of up to 12 percent on Wall Street. In the days before the disbursement of IMF funds and Milei's devaluation, the markets lost faith in the ability of the government to sustain the peso's artificially high value at the cost of burning through the scarce foreign reserves. The country’s ‘risk index’ went from 572 points in mid-January, to more than 1,000 before the IMF bailout was agreed, closing the possibility of obtaining dollars in the private debt market. This buried the government's illusion of combining the funds from last October's capital amnesty for untaxed dollars with IMF funds, to buy new private debt and thus giving another lease of life to its so-called economic ‘plan’. In addition, the 10 percent tariffs imposed by the United States on Argentine products will affect key sectors such as steel, aluminium, and auto parts, with estimated losses in exports of at least US$1 billion. Trump is trying to close the United States, the world's largest consumer market, to goods from the rest of the world in the context of a deep crisis of overproduction and underutilised industrial capacity. This will push China and all other industrial nations to desperately seek alternative markets for their products, which will further reduce the competitiveness of the already battered Argentine industry. Added to this is the drop in international soybean and oil prices, two of Argentina’s most important exports. Fewer exports mean fewer dollars and a drop in production which the capitalists translate into more exploitation, more unemployment, and more austerity. The ‘way out’ they propose is clear: an end to currency controls and a new devaluation. This is exactly what ex-president Mauricio Macri has been tirelessly demanding in his media offensive of recent weeks. As we warned, the libertarian experiment of Milei, the IMF and the capitalists was highly unstable, dependent on an extremely volatile international situation. The tariff war and its consequences have confirmed this perspective and buried the government's economic prospects, leaving it naked before the storms in the markets. Divisions above, class struggle below Politically, the government has fared no better. Milei's attempt to handpick the Supreme Court, so as to protect his government's austerity program against any challenge from the judicial branch of the state, has been frustrated. Milei had arranged to add Manuel García-Mansilla, a reactionary with an ideological affinity with the president, as well as Ariel Lijo, a judge associated with Kirchnerism, to the three already sitting judges by decree. The move to appoint judges by decree (normally, they must be confirmed by the Senate) was soundly defeated in a Senate vote, and the move was also declared unconstitutional by a federal judge. The Chamber of Deputies approved the creation of an investigative commission and will question Milei's cabinet chief and ministers of economy and justice over the $Libra ‘cryptogate’ scam. Macri's Republican Proposal (PRO), struggling for survival, and the Radical Civil Union (UCR), look to line up to strike against Milei in the upcoming midterm elections, as part of the ongoing dispute within the ruling class over how to move forward in the face of the failure of the Milei-Caputo economic plan. Fights between cliques expressing the different interests within the ruling class are consuming Milei's Freedom Advances (LLA) party as well as all of the opposition parties. Within Peronism, the governor of Buenos Aires province, Axel Kicillof, and ex-president Cristina Kirchner are disputing how to approach the next elections in Buenos Aires, the largest province and a key strategic territory. Both are vying to represent the interests of the national bourgeoisie, which demand policies of economic protectionism to maintain their profits, given the low competitiveness of Argentine production on the world market. Kicillof is seeking to build his own power base through electoral manoeuvres, to weaken Cristina Kirchner's dominance on the Justicialist Party and position himself as the strongest presidential candidate for Peronism in the 2027 elections. Both leaders, despite their personal dispute for power, agree on the need for devaluation, keeping wages low, and advancing a labour counter-reform to suit the needs of the national capitalists. Their orientation puts in conflict their need, on the one hand, to preserve the stability of Argentine capitalism and, on the other, to maintain their social base by being seen to resist Milei. All of this is taking place in a context of growing mistrust of all the parties that have implemented austerity over the last decade. It is no coincidence that the cry of the Argentinazo of 2001, the famous "Kick them all out!", is heard once again on mass demonstrations. Many of these demonstrations are notable for being ‘self-convoked’, which means that workers and young people are looking for avenues of struggle outside the bureaucratic trade union and political structures. The perception that politicians, locked in their power squabbles, are increasingly alienated from the real needs of those at the bottom, is felt in the nerves and muscles of the working class. Since February, the struggle has taken to the streets in a whole series of marches and protests. These have involved different sectors with different characteristics, but all express the widespread frustration built up against the government. Not even the manipulated data of the national statistics agency, which suggested a drop in poverty, an alleged economic recovery and the recuperation of workers' purchasing power, could sustain the government's worn-out narrative. This ‘data’ did not stop the mass demonstrations, especially in large cities, which effectively confronted and broke Minister of National Security Bullrich's repressive anti-protest protocol. The ‘anti-fascist’ demonstration on 1 February, the annual march on International Working Women’s day, the annual march on the Day of Remembrance for Truth and Justice, the weekly retirees' marches, and the last general strike called by the General Confederation of Labour (CGT) all have mobilised millions of workers and young people. Undoubtedly, the impact of the crisis and the radicalisation of a layer of workers, retirees and students forced the leadership of the CGT to make a call to join the retirees' march on 9 April and to bureaucratically call a general strike for 10 April, so as not to be seen to be left behind by the wave of protests. These events showed the masses' enormous capacity and will to fight: the workers mobilise massively every time they find a channel for struggle. The general strike made clear, once again, the immense strength of the working class. But it also showed that the CGT bureaucracy is not willing to seriously confront Milei, the IMF or big business. They only seek to preserve their own personal privileges, while millions of workers suffer setbacks in their living conditions. It is clear that without the dampening role played by the leadership of the CGT, the capitalists could not have gotten this far in their offensive against the working class. The CGT called for a 36-hour general strike. But it didn’t call for assemblies or meetings in the workplaces to discuss and organise a serious, active struggle with a clear political goal to stop the anti-worker government in its tracks. An isolated measure like this, without continuity, is clearly not enough. It would take a real plan of struggle from the unions to defeat this brutal attack on the workers. This plan cannot come from the union bureaucracy above. It will come from the "self-convocations" in the workplaces, factories, neighbourhoods, unions, schools and universities, together with the elected bodies of workplace and factory delegates. It will come from the experience of class struggle that will arise in the heat of the crisis and the fight for better conditions. It is necessary to link the concrete demands of workers, pensioners, and youth with the broader need to build a revolutionary party, which, armed with Marxist theory, can present a serious alternative to capitalism and its rotten, corrupt institutions. This is the fundamental task of the left and serious activists. A preparatory phase The brutal austerity that the workers are being forced to endure cannot bring any kind of real economic stability. On the contrary, it impoverishes millions of workers, children, and retirees, while attacking the industry and productivity of labour that has been built up on a capitalist basis in past periods. This is becoming more palpable to increasingly large layers of the population. The failure of Milei and Caputo means more debt and cuts in an environment of growing fury. The IMF loan, far from being a guarantee of stability, will largely be used to pay Argentina’s previous debts with the IMF itself. It does nothing to protect against a future run on the peso in the long term. The risk for the government is clear: it is running out of reserves and economic firepower in a financial crisis, amid political and social instability. In the best case, the government could implement a ‘controlled failure’, assisted by US imperialism, to momentarily delay the imminent clashes between the contending social classes. The needs of finance capital and the bourgeoisie are colliding head-on with the needs of the working class in the context of the deepening world capitalist crisis. Things are accelerating towards a social explosion. The possibility of an eruption of the masses has been present in the political situation since 2018, when the ruling class, represented by the Macri government, went on the offensive with a series of counter-reforms that unleashed a wave of protests. That massive response managed to stop – or at least limit – several of these attacks on working conditions and pensions. At that time, what was at stake was a possible social explosion and the overthrow of the government by a direct intervention of the masses in the streets. This outcome was only avoided thanks to the reformist leaders of the Justicialist Party, who used what political authority they had left to channel the popular anger into the electoral field, opening an escape valve to stop an open outbreak of class struggle (which had been seen in several other countries in the region, such as Ecuador and Chile). This detour culminated in the victory of the government of Alberto Fernandez and Cristina Fernández de Kirchner in 2019. The efforts of the parties of the regime to maintain the stability of the system can at best only delay the coming clashes between fundamentally opposed class interests, rather than eliminate them. These clashes erupted most recently in various northern provinces, which are poorer than the national average, with the Salteñazo and ‘Jujeñazo’, city-wide uprisings that faced the governments of Sáenz and Morales-Sadir in June 2023. In last year's ‘Misionerazo’, the state’s ability to repress the protesters was momentarily left hanging in midair, as police joined teachers’ protests over wage disputes, before the political and trade union apparatuses managed to undermine their struggle. Discontent runs deep and is intensifying quickly. Today, conditions have radically changed. As we have been pointing out, the main parties are deeply discredited due to their participation in the austerity policies of the last ten years. At the same time, anti-establishment anger is growing. Just over a year ago, this sentiment brought Milei to the presidency. Today, it is beginning to turn against him as a consequence of his program of war against the workers. Sooner or later, an accident will express this necessity. We are not living under a fascist government, nor are we moving towards a Bonapartist regime where the sword rules over all classes. We are in a preparatory phase before a mass eruption of the class struggle, and a period of rapid changes and developments in the situation. The question, therefore, is how we communists prepare for these events. The task at hand is to build a revolutionary leadership that can intervene in the outbursts of class struggle, which will inevitably occur, to change the course of events and advance the working class towards the seizure of power. https://marxist.com/mileis-economic-plan-is-kaput-where-is-the-government-going.htm Back |
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