You just can’t hold back a good man – after grabbing this column just three weeks ago, new Security Minister AnÃbal FernÃ¡ndez (why does the former justice minister have to make every wallet that ‘Does he rule look so Orwellian?) week with an extremely outrageous tweet against a fellow press member who had not personally challenged him in any way.
Even taking the most charitable view of his gratuitous intervention – which he had simply reminded the La Nacion the cartoonist Nik that he was throwing stones from a greenhouse while criticizing the electoral campaign of free graduation trips by the governor of the province of Buenos Aires Axel Kicillof since his daughters’ ORT college also benefited from state subsidies – it was inexcusable. Notably because his information was both too good and flawed – on the one hand, too familiar with the personal information of the Dzwonik family (still Orwellian) and all too willing to disclose it, but on the other hand, he was misinformed. by spreading the false news of ORT grants. An abuse of the formidable intelligence resources of his ministry against organized crime (whose budget exceeds AFI intelligence itself). But even though his intention had not gone beyond “debating” an inconsistency, he chose an incredibly awkward way of expressing himself – displaying the fact of knowing where the kids have gone to school is an issue. Mafia message as clear as if he had made Nik “an offer he couldn’t refuse.”
Nice try, AnÃbal, but although his little explosion may have been qualitatively the pits, this does not compare among the recent news with the crackdown on corn exports in terms of concrete or long-term damage to the country let alone with the price freeze slapped on 1,247 “essentials” (a list that extends to Coca Cola and Chivas Regal – should we conclude that whiscola is the favorite glass of new officials?) by new Internal Trade Secretary Roberto Feletti in midweek after just a few days in office. At the IDEA Business Symposium starting the same day, Chamber of Commerce President Mario Grinman traced the failure of price controls to Roman Emperor Diocletian (reign 284-305 AD), referring to somewhat simplistically the decline and fall of the Roman Empire. to this experience, but it missed by more than two millennia – the first price restrictions date back to the Code of Hammurabi in ancient Babylon before 1750 BC.
Flaws in price controls are all too familiar a story in Argentina. All kinds of ways to get around them, the best known of which is the invention of new brands by playing on the volume or the ingredients of the frozen product. But the ultimate problem that complicates price controls is that even their unexpected success also contains the seeds of failure. In the event that a frozen price is maintained for an indefinite period, this product invariably disappears from supermarket shelves while it goes against all the laws of the economy for manufacturers to make their heaviest investments for increase production of the cheapest item.
The history of price controls in Argentina does not go back to 1750 BC or even 1750 AD, but it goes back quite far. Such controls presuppose inflation by definition and this is relatively recent although, contrary to popular belief, inflation did not originate with Peronism – there was double-digit inflation in the first year of the last century. and at least three more such years in the first four years. decades of the century. But inflation only became chronic in the days of the hero of Tomorrow’s Peronist Loyalty Day. With inflation reaching 39% in the midst of a severe economic contraction in 1952, the proactive Peronist state implemented its second five-year plan linking price increases with productivity – inflation fell to 4% in the year next, but returned to double digits in 1955.
Less than a month after the return of Peronism, a price freeze was already part of JosÃ© Ber Gelbard’s social pact in mid-1973 reducing 1972 inflation from 60 percent to 17 percent, but the ice was starting to fall. crack after only four months and the year 1974 ended with 40 percent inflation although the final collapse did not occur until the Rodrigazo mid-1975 (a year ending with 180 percent inflation).
The next chapter of this saga was the Austral Plan, subject of this column on July 24 following the death of its author Juan Vital Sourrouille. By early 1985, the inflationary plateau since the 1980-1982 financial crisis had reached levels of 30 percent with experiences of hyperinflation elsewhere in the world in countries ranging from Bolivia to Israel. Hence the Plan Austral – a shock package whose core elements included a total freeze on wages and prices, the elimination of all indexation and the end of all printing of money with inflation plunging from 30 to 6. % during the first month of the new austral. currency. But inflation gradually rose to a monthly inflation of 19% in the last month of Sourrouille (March 1989) while the Spring Plan replaced its Southern Plan – hyperinflation (197% in July) soon shook the country. This was followed by convertibility in 1991 with the result that double-digit inflation did not return until 2005. Famous Internal Trade Secretary Guillermo Moreno (2006-2013) took his time moving towards a freeze general price, which only intervened in its last months. in power – in large part because he could ignore actual price trends with monthly inflation figures pre-released by INDEC’s national statistics office. Finally, price controls went against all of Mauricio Macri’s principles but in free fall he froze the prices of 60 basic food products for the last seven months of his 2015-19 presidency.
The lessons of the 1973 social pact and the southern plan seem to be that the more severe the price controls and the longer they last, the harsher the crash that follows. Price controls have rarely seen more than the short-term success that almost always accompanies them, but perhaps nothing more is asked of Feletti – just to stabilize the boat for the next four weeks.
Last but not least, Peronist Loyalty Day greetings to any reader who might celebrate it tomorrow (for his 40th birthday, I interviewed no less than Cipriano Reyes, who lived just two blocks from the house in La Plata where we lived at the time).