Episode 282 – Argentina for Sale with Daniel Kostzer

[00:00:42] Steven Grumbine: All right folks, this is Steve with Macro N Cheese. Today’s guest is none other than Daniel Kostzer. He is chief economist at the International Trade Union Confederation, ITUC. He was previously the senior regional wage specialist for the International Labor Organization in Asia and the Pacific, and has been appointed to serve for his country at places such as the World Bank and the United Nations Development Program and the Ministry of Labor in Argentina.

Today’s conversation is going to take us to Argentina. Javier Milei, the radical right wing libertarian character that has taken over, with his bombasticity and his slash and burn neoliberal, libertarian style economics, just had his first legislative wins and the country is in an uproar.

There are cars on fire. There are people throwing Molotovs. Police shooting at citizens. Citizens decrying the outcomes. And Democracy Now, just this morning- and for those of you who are listening to this later, I’m recording this on June 13th, 2024- they say “Argentine Senate approves Milei’s plan for economic shock therapy amid mass protests.”

And this is very short, so just take a moment to read it, set the stage for our conversation. “Argentina Senate has narrowly passed far right Libertarian President Javier Milei’s highly contested reform bill. As lawmakers debated the measure on Wednesday, protesters outside the National Congress in Buenos Aires were met with riot police who deployed tear gas and multiple arrests.

Among other things, the bill imposes sweeping austerity and privatization measures, and slashes labor rights. Opposition Senator Martin Lusto spoke during Wednesday’s debate. He said, ‘This bill gives everything instantly and forever to the big companies and it tells pensioners to wait. The big companies get less taxes and tax stability for 30 years.’

In the tax package, Argentina’s biggest millionaires get less taxes and stability for 15 years. But pensioners who contributed for 30 years don’t even know how much money they’ll get next month. Among the planned spending cuts is the dissolution of the government office dealing with gender violence.

The head of that office, Claudia Garcia, resigned last week. The bill must now go back to the lower house, which has already approved an earlier version in April. The measure could be fully approved later today.”

And with that, let me bring on my guest, Daniel. Daniel, welcome to the show, sir. Thank you so much for joining me.

[00:03:51] Daniel Kostzer: Hello, Steve. Thank you very much for inviting me. It’s a real pleasure to be with you.

[00:03:57] Steven Grumbine: The honor is all mine. You have quite the storied past. I got to see you on a teaching webinar that you did with [Open Society University Network] OSUN and [Economic Democracy Intitiative] EDI with Pavlina Tcherneva. We’ve spoken with Pavlina many times on the Job Guarantee and ‘Jefes y Jefas’, which you were instrumental in, from what I understand, as well.

[00:04:19] Daniel Kostzer: Well, I had the privilege to be the one who wrote the first sketches about that program, but actually the real instrumentation was done by a magnificent team of technical people at the Ministry of Labour of Argentina during the year 2002, when the crisis erupted. And they swiftly implemented such a big program that had a real impact in the life of people.

I always say that, outside of my two sons, that was the most important thing that I ever did in my entire life.

[00:04:56] Steven Grumbine: That is absolutely amazing. For us, the job guarantee is a very core part of what we want to see, as part of a transformational approach to rebuilding society from the bottom up, and direct payments to workers, to keep them from sliding into subsistence. .

[00:05:16] Daniel Kostzer: Well, actually, I think one of the most important issues of a job guarantee, is that you restore the- what you may call the structural value- that having a job and employment, teamwork, being part of a common project, in terms of the individual and in terms of the society. Unemployment is not only an economic waste, because you are not using a very important resource for growth, it’s also a family issue and a personal issue. That’s why, as Prasch used to say, a labor market is so different from the broccoli market. The work you cannot storage, the work that you didn’t use, you won’t ever be able to use. But also labor or employment, gives a sense of fulfillment and self-realization of the individual.

Even if sometimes our jobs, that in general are considered of low productivity or not very productive jobs, the mere fact that you are joining a group of people to do something that you are getting paid for, that it’s one of the important things about having a job. Having employment and also fulfilling your most basic material needs.

[00:06:45] Steven Grumbine: That’s well said. I think of what’s going on in Argentina now, and I think it’s the absolute opposite of this. As we’re watching them gut social services, gut the basic public purpose of the entire nation, privatizing and selling off industry and selling off services to capitalist companies that are there to make a profit. And you see investors licking their chops, waiting to get a piece of Argentina now.

And we’ve seen what this has done elsewhere. This is not the first time that we’ve seen mass privatization and, massive slash and burn to the currency issuing nation’s national government. What are your thoughts on Javier Milei, in general? How would you describe him?

[00:07:38] Daniel Kostzer: Well, to put the things in context, if you would’ve called me two weeks ago, I would think that Javier Milei was very peculiar, idiosyncratic phenomenon of Argentina. Which has always been a country with, I would say- because this is not the first time that Argentina is going to attempt what you may call- a full capitalist system that tries to change the structure.

We faced it during the Menem periods in the ’90s. We also faced it during the dictatorship between 1976 to 19 83. We had it after the Peronist government of the ’50s. So it’s not the first time that we’ve had this attempt. And at the same time, although it has its very peculiar or idiosyncratic characteristics, after seeing what happened in the elections in Europe last weekend, and the extreme right getting into power or having good elections in Germany, in the Netherlands, in Italy, with Bolsonaro in Brazil, and Trump in the United States, I think that we are in the presence of a more, I would say, global phenomenon. A global trend, that doesn’t have to be always that trend, but that it’s mainly the failure of formal democracies to deliver to the people, what the people would expect of their economies and their societies.

Javier Milei is a very eccentric character. He got into office only because the previous government failed. If you would think that- we have these ‘two rounds ballot’ type of elections- and if you would think that the other candidate almost won in the first round, stopping short by three percentage points, it would be very difficult to understand how can Milei obtain 56% in the second round, but it’s a ballot where there are only two candidates.

But, besides the electoral arithmetic [sort of saying], I think that the problem is that in Argentina, as well as many other countries where people are choosing or voting for these extreme right sort of libertarian candidates that are ultra capitalists believing only in the market, that they even praise the Austrian school of economic thought- everybody who saw a book on economics knows that it’s a very marginal school of thought- Milei is part of this trend that is the result of the capitalist system that doesn’t deliver to the people, the expectations. Even failing those that studied, that tried to improve their education and their skills. And they are hanging around with precarious jobs, low wages, and without any kind of stability that would allow them to structure their life.

In Argentina, these things became more dramatic because of the, what you may call, the external conditionalities, which are basically the foreign debt and the extreme dependency of Argentina’s economy on foreign resources. But going back to Milei the character is somebody that you can call messianic.

He claims to be an economist. Perhaps he has a degree from a private university, but for sure, his knowledge about economics, his knowledge about economic techniques, is only constrained to a couple of dogmas that think that inflation is a monetary issue, only a monetary phenomenon, and the only way of stopping the monetary phenomenon is just by stop printing money.

Stop , increasing the money supply to the people, and that would bring automatically inflation to its path. But actually what he’s doing is, as you mentioned before, a shock therapy, a deep recession into the country and giving all the benefits to a handful of large corporations, not only international, also national big corporations, to tear pieces of the Argentine wealth and the Argentine capabilities, in order to increase their profits.

[00:12:48] Steven Grumbine: Profit seeking. It’s always profit seeking.

[00:12:51] Daniel Kostzer: Rent seeking.

[00:12:52] Steven Grumbine: Rent seeking for sure, yes.  This happened in places like Detroit, Michigan, where Detroit went bankrupt and they sent private investors in there to pick apart the social fabric and pick apart the treasures of Detroit. And we saw this happen in Haiti.

We saw this happen in Puerto Rico, when Puerto Rico was hit with hurricanes and the private tiers came through and picked it apart. And the state government, the US government, could have made them whole instantly, but instead they allowed them to flounder and gave them the private equity funds, to go in there and basically sell it apart.

The greed that goes with this does not benefit the people, but it does benefit some people. Some people win, very much so, which is why there’s any kind of belief in the system at all. Because those that are investors, those who are speculators, those who like that kind of, precarity, they end up thriving, while the regular rank and file people that have to live in that- to your point and you just said it- they have no security. Nothing that they can rely on because it’s been privatized and it now has rent seeking, as its primary motive, for accumulation. Obviously Milei has come in here with, I think they’re saying 300% inflation. 300% inflation!

That sounds a lot like, what we would call, hyperinflation. What was the stem? What was the cause of that hyperinflation occurring in Argentina?

[00:14:30] Daniel Kostzer: Well, you have a couple of factors there. Argentina, after the Macri period of presidency [2015 – 2019], got back into a huge debt with the [International Monetary Fund] IMF and private investors. Yeah. Uh, to give you an idea of the size of the depth of Argentina with the IMF, it’s the highest loan that the IMF ever gave to a country and induced by Donald Trump, his former executive director at the IMF, Claver-Carone- the one that took the presence of the Inter American Development Bank and was kicked out from there for having some sort of, personal affair, violating all the ethic rules of the Inter American Development Bank- they achieved a loan to Argentina of $57 billion, what would be more or less 10% of the Argentinian GDP.

What was the, goal of that loan? What was the objective of that loan? Just to pay back to those huge funds- BlackRock, Pemberton, and all the famous hedge funds that are plummeting and operating all over the world- to pay them the loans that they gave to the Argentinian government, just to make short term investment in Argentina in the financial sector. And they wanted to leave the country and since they wanted to leave immediately, there weren’t enough dollars in the country.

So that debt again, was in 2018, with the full support of the Trump administration and the IMF, was the last action done by Madame [Christine] Lagarde, as executive director of the IMF, imposed a very big burden onto Argentina. Then came a government that tried to sort out and to negotiate.

I consider personally that they followed the wrong path because they were expecting that the IMF was going to be very understanding and very supportive, because [Kristalina] Georgieva had a different approach, much more humanitarian and socially minded than the previous approach to the IMF. They thought that there was a new IMF and that negotiation never reached that level, to the point that Argentina made a restructuring of its debt with a private investor way before they achieved the agreement with the IMF.

In the past, when you needed to do a private agreement or an agreement with private investors, they would request you to go to the IMF, sort out everything and the adjustment program with the IMF, and then you go back to negotiate with them. This time was the other way around. And what was the reason? The reason was that the IMF was so overexposed to Argentina, that private investors were afraid that the IMF would take all the money that otherwise would go to them.

So that’s why they agreed, very advanced . That government between 2019 and last year 2023, had a positive vision, in terms of maintaining the purchasing power of workers, trying to promote employment, but it had a couple of events that were peculiar. Number one, the pandemic. The pandemic and the approach to the pandemic that was quite, I would say, a strict one.

Argentineans went almost two years without getting out of their homes, the production went down very sharply, and the government tried to sustain, to maintain the level of activity, also had a negative impact in relation to the export side, to the dollars that would come into the economy and that put pressure on the exchange rate in Argentina. That immediately fueled inflation. And why is that? Because Argentina is a country that exports, what you may call, wage goods. We consume domestically, in daily consumption, the same thing that we export.

We consume bread, we consume beef, and we export wheat and we export meat. So, very rapidly, the producers for the external markets, for the export market, they request domestic consumers to pay at least the same thing that would be paid in the foreign markets to them.

Yeah. So any change in the prices of food commodities worldwide, they are immediately transferred to the domestic consumers and that’s inflation. And that’s a big share of the consumption of the workers and the most popular classes. And we had the pandemic, we had the inflation coming out of the pandemic, that also impacted the United States and developed economies.

And on top of that, we had the Ukraine-Russian war, that gave another boost to the prices of commodities. Ukraine exports almost the same things that Argentina exports, and that shortage in the supply brought the prices much higher. And that was one of the things that fueled the inflation in Argentina.

On top of that, you had this other effect, that was a drought, that impacted because of climate change. The deepest drought in 100 years in Argentina. So, the dollars that Argentina got for their exports went down. Not because prices went up, but the quantities that Argentina could sell went down.

So that was another very dramatic mixture. But let’s come closer to the Milei period. What happened? Milei made the campaign saying that he was going to dollarize the economy, that he wanted to dynamite the central bank, that he wanted to open and lift any kind of regulation. So if you have some savings in pesos, what would you do if the candidate says that the dollar should be three times the price that the dollar that was in the market nowadays? You would save dollars.

Yeah. And that put more pressure in the value of the foreign exchange. And again, the prices of the dollar, they rapidly go into the domestic inflation, into domestic prices. And when Milei took office, he made a swift devaluation of 120%, overnight. And that is what brought us to almost 300%.

As you mentioned, that’s hyperinflation. The threshold between high inflation and hyperinflation, it’s a very thin one to be properly defined. When we think in hyperinflation, we remember Argentina in the early ’90s, or we think about Zimbabwe in the recent history, or we think about inflation in the Weimar Republic, in Germany. But we are not very sure how high it should be nowadays.

So if you say 300 is high inflation or 300 is hyperinflation, well, that would be an analysis for history economics textbooks of the future. But actually, the reality is that if you increase the price of the foreign exchange on top of that, you reduce the value of the interest rate for pesos. Everybody will go running to buy US dollars, and that instantly goes into domestic prices. Now the inflation is going down, but why is going down? Because Argentina, since December 2023, has seen a reduction in the level of economic activity, which is dramatic. Today I was reading that the spare capacity in the manufacturing sector in Argentina now, i s 56%. That means that we could double the production overnight because they are not using it. That would be a very, I would say, easy case for bringing wages to people for increasing demand. It seems that almost 250,000 jobs were curtailed in Argentina during the last six months. The sales of cars went down by 40%.

Construction went down by almost 50%. So, of course that will reduce the inflation rate nowadays. But that’s, as we used to say, is the peace of the cemetery.

[00:24:18] Steven Grumbine: It’s funny, we talk about, in the US, the Volcker rate hikes and how he quote, unquote, “took on inflation” in the ’70s with the OPEC crisis. But what he did, was literally kill the economy. And hey, well naturally, ‘hey guess what? the economy’s dead.’ So yeah, prices go down… congratulations?

[00:24:40] Daniel Kostzer: You mentioned the example of Detroit. I was [an] exchange student in the United States in 1973, the year when all the Watergate trials started and the end of the Vietnam war.

[00:24:54] Steven Grumbine: The end of Bretton Woods.

[00:24:57] Daniel Kostzer: Yeah. I remember what was Detroit those years, a bustling, booming city, and you could see the multiplying effects of the car industry and the steels and all these activities there. Now everything looks like a ghost town.

[00:25:19] Steven Grumbine: Yeah, it’s bad. We’ve got a lot of these deserts in the United States, where Industry has fled. There’s no public investment, and the people are left behind, destitute, on an island, no food, very, very poor economy, very little to look forward to. And that takes us back, I guess, to Argentina.

I guess one of my next questions is this, Why the IMF? I mean, the IMF comes with structural adjustments. They do a lot of things that literally hurt economies. You look at Tunisia right now, and Tunisia is busy trying to produce green energy, through green hydrogen for Germany, to meet their EU targets, while they [inside of Tunisia] are suffering and they can’t produce enough energy for themselves.

You look at Argentina, they’re having to produce exports to compete, to bring in foreign reserves. And at the same time, they’re unable to, because of ineptitude of government? Why would they go to the IMF to begin with? Were they searching foreign reserves? What was the purpose of going to the IMF to begin with?

[00:26:36] Daniel Kostzer: Well, I think that in Argentina, we have a very, I would say, a high correlated model, that the more pro-business the government is, the more loans that they get from the IMF. If you think that the Peronist government, the populist government, if you want to call it populist, using or misusing this concept of [Christina Fernandez de] Kirchner, in 2005 or 2006, canceled the debt with the IMF at the same time that Lula did in Brazil. They went together and they canceled the debt, just in order not to receive any type of missionaries and instructions there. And the right wing governments are the ones that go to the IMF, and there are two reasons there. On the one hand, right wing governments, especially of the 20, the 21st century, they make a lot of money, or the money and the process of accumulation is done through the financial sector.

When you induce the financial sector, you have short term capital coming into the country, that after making enough profits, they want to fly out of the country. And when they want to fly out of the country, you have balance of payment bias. But the second issue, and I think that that’s more ideological one, they want the IMF programs because they clearly define a pro-market, pro-capitalist model for the governments to come. They know that they are going to leave in two or four years or five years. But the IMF programs, once you get into one program, it takes decades until you can get out of it, because in general, you roll over, you refinance that debt.

So it was a very, I would say, courageous measure that was done by Kirchner and by Lula in 2005, [I think I’m right it was 2005] to cancel the debt with the IMF. When you go and you see what happens at the IMF, well, you have there, what you may call a more structural ideology of that institution, which is clearly pro -market.

And they are graduates from, mainly the University of Chicago. During a long period of time, the IMF was almost taken by the Chicago graduate’s monetary approach for any other thing, and they believe in setting the price right?

What does it mean to set the price right? Eliminate any kind of public intervention in the setting of prices, in the setting of interest rate, in the setting of foreign exchange, in the setting of wages. No minimum wages. No regulation for the labor market. Easy to hire and easy to fire. Reduction of pensions. So that set of ideas, it’s a very ideological one.

And they are the ones that are still running it. If you go and you talk to the IMF, they still talk about the Phillips Curve to explain unemployment or to explain inflation. They still think in the Beveridge Curve for explaining labor market shortages. In my role of economies of the ITUC, I interact with them a lot, because they claim to make consultations with the labor movement.

And we always tell them, “Sorry guys, what you think is a tight labor market, we know that it’s more collective bargaining, more social dialogue, higher wages, higher protection to workers.” So when you consider it’s a negative word, for us, it’s a very positive word.

So it’s this ideological bias. On the other hand, talking, especially for the case of Argentina, when the IMF ran with this huge loan, that as I told you was almost 10 percent of the GDP of Argentina in 2018, was precisely to help the right wing government, to stop the re-emergence of what they considered a populist government. And they failed. They completely failed, because the other government took over.

So you have, I would say, three lines of thought at the IMF. One line was obviously, Georgieva and one or two other people there, that would try to talk about the social responsibility, the redistribution of the [Special Drawing Rights] SDRs, the IMF account of money, the special eh, rights of the IMF, the redistributions of countries could face the pandemic, and a more, I would say, kind approach to a capitalist economy.

But then you have those that, they define the program with the 2018 government of Argentina. That they, after the failure, they wanted Argentina to fail, to say, ‘see that country always will fail because they are always doing the same thing.’ And then you have the other big chunk of ideological people of the IMF who wanted Argentina to fail, because they cannot accept that the government that supports pensions that supports workers rights, that tries to keep the purchasing power of wages, that tries to regulate the food market, to avoid these hikes in prices, would succeed.

So my explanation is that the IMF is a very regressive institution, that is run in the most, I would say, regressive way. The countries that they have the largest share of the capital, which is the United States, who has the veto power, they always are trying to impose structural adjustment/austerity policies.

Because they don’t talk about a structural adjustment anymore, now they talk about consolidation of public finances, which is another way of naming the structural adjustment. Those are the policies that they want impose all over. They are theoretical background. It’s a handful of very, I would say, insufficient tools for the analysis of the economy. And I would challenge anybody to go on to check the Article Four.

Article Four are the supervisions that every country, which is part of the IMF, has to do every year. That they have the diagnosis of the economy, and they do the description of the economy. And then if you go into the policy recommendations, I would challenge anybody to see differences between the policy recommendations for Zambia, for Tunisia, for Argentina, for Georgia, or for Ukraine.

You will see that independent of the structure of the country, independent of the context, all the recommendations tend to be the same. Improve the fiscal balances, reduce state interventions, free labor markets, so it would be easier to hire and fire, reduce the weight of pension in the overall budget. And nowadays they incorporated implement measures in order to protect the most vulnerable sectors, but nothing more than that.

[00:35:39] Steven Grumbine: You know, when I think about taxes, from the MMT school, taxes serve as the obligation that maintains the viability of the state currency. And it serves as an obligation that keeps a monopoly power on that currency, because taxes must be paid in the unit of account. But I look at structural adjustments, and I look at the Article Four, like what you’re saying, and I’m saying what they’re doing is de facto creating a similar tax obligation, to a debt in a foreign currency. Similar to what they do at home, but abroad.

And by doing this, they create dependency on U. S. and foreign markets, and they make it inescapable. These structural adjustments are a debt trap. And I’m curious as to your thoughts on hegemony with the empire of the United States, using the IMF as a tool for this. And then Milei coming through and saying, ‘we’re going to dollarize.’ Can you tie that together for me?

[00:36:49] Daniel Kostzer: To be honest, I think that Milei has now stopped talking about dollarizing. He’s one of those people that basically considers that the money printing, the so called, seignorage power, the seniority power that the lords- those that printed money, had in the economy and states, especially national government, he thinks that that’s a failure of the system.

He thinks that printing money, and to have your own currency, is the only explanation in order to explain why you have inflation, why you have inequality. Again, the other day, Milei said, for example, when he was in Davos, he said that neoclassical theory is wrong. Talking about market failures. That monopolies are not market failure, that are rather the success of the one that produced the best service or the best product. How many economists, even right wing economists, have you heard that would agree with that statement?

Just to mention about Milei. But on the other hand, my impression is that, the world economy has been taken over by a bunch of oligarchs, we could use that word. By the hedge funds, that they now manage more money than the GDP of countries like Germany or France. If you open the newspapers today, you will be shocked seeing that the board of directors of Tesla allowed Elon Musk to take $52 or 56 million dollars as bonus. Or that Mark Zuckerberg bought a $300 million boat for his birthday.

And on the other hand, we are talking about people that cannot get stability in their jobs, in order to get a mortgage, to buy a house or to buy a car or to have a decent life. So, I think that the capitalist system has these very corrosive, inequality bound behavior. That it’s one of the explanation why Milei exists, why Meloni exists, why Vox in Spain, with their right wing conservative, fascist narrative exists. Why parties that they deny the role of the state that they start to put the blame on migrants.

Even why Donald Trump exists, it’s people that lost their hope. When you see which are the states that voted for Trump in the original elections, and which are the ones that are going to vote for him, you realize that, well, the problem is precisely the unfulfilled promise of the golden years of capitalism, where you knew that if you studied, you were going to get a job.

And if you have a job, you would have a house, a car, and a decent life, and holidays and pension when you retire. Which in the seventies, we consider that was very alienating. But as Joan Robinson used to say, “what’s worse than to be exploited, is not even being exploited.”

[00:40:36] Steven Grumbine: I think about what you said earlier, the very limited production within the country. They are only at halfway, they are nowhere near. And we frequently would talk about the productive capacity being that point of inflation. In this particular case, supply chains were what brought a lot of inflation around the world.

So did seller’s inflation, which Isabella Weber has documented quite clearly. But in particular, the lack of productive capacity, supply chain breakdowns, things like that, during the pandemic in particular, created a lot of these circumstances. It seems to me like this is such a no brainer, that by increasing production within the country, it would not only fix jobs, but it would also fix the inflation itself.

But that goes against the ideological proclivity of those libertarians who have that weird, I guess let’s go back for a moment, the definition of inflation by libertarians, Austrians, the Chicago school, is growth in the money supply. It’s not really about prices.

I mean, maybe it corresponds to that, but the idea is, ‘Hey, they printed more money, that’s inflation!’ Because they consider money, in a commodity money sense, like pegged to an ounce of gold, etc. Can you talk about what that means in the Chicago school version of the world? Define inflation?

[00:42:05] Daniel Kostzer: Well actually, the problem when you have the monetarist approach, that thing is based on a very simple equation, where, to make it simple, you would say that P times Q, that means prices times the quantity supply, has to be identical to M times V, the money, the numbers of currency, or printed and banking money, times the velocity of circulation.

Since the velocity of circulation is a very stable or structural factor, and the quantity of production is also a very structural factor, the only two variables that play there are the P in the left hand side and the M in the right hand side. So, if you reduce M, that would immediately reduce P.

Quoting again, Joan Robinson, that will be the canonical wisdom of the common sense that the economy is like whatever, a shop or a household. What they don’t consider are the structural parts of the system. For example, the capacity of a monopoly to set prices. And that’s what we saw in the exiting of the pandemic, we have the supply bottlenecks.

Mainly because the production started to be distributed all over, rather to be concentrated in the traditional conglomerates, going back to Detroit with the car industry, or what you would see in other sectors. But with this distribution of the production and the bottlenecks in terms of transportation or the sanitary restrictions, what happened was that the quantity supply was lower, but also when you reopen the economy, because the strongest inflation was after reopening the economy, it wasn’t when the products weren’t there, it was when the products started to appear, and all these companies that saw their profits reduced during the pandemic, they wanted to restore their rate of profit, so they increased prices. Why were they able to increase the prices? Because they have monopolistic capabilities.

And nowadays these big conglomerates, they not only have the capacity of being price setters worldwide, they are also price setters because of their oligopsonistic capabilities. Because they also set the prices of their suppliers, so they get the bulk of the value added, keeping their suppliers in poverty and their consumers also paying higher prices.

So the monetarist approach never considers the structural qualities of the market. That means the capacity of price setting in that economy. And that’s something that should be included in a right structuralist analysis in order to know what may be happening with inflation and with prices.

In the case of Argentina, why, with such a beats per capacity, prices still go up? Well, because you have companies that they control, for example, 75 percent of the production of noodles, 92 percent of the production of rice, or the sales of rice to the market. You have natural monopolies in the case of health services providers, they’ve increased the prices three times since Milei took office.

You don’t change your health provider every month according to the price that you receive on the bill, because if you move from one health provider to another, you are going to pay extra or you have a period that you don’t have the service. So you keep the same independent on how much increase in the prices as long as you can pay. The same happened with the internet provider, the telephone, the cable TV. And all these other services that now account for a big chunk of the consumption, it’s not only food. You may move from better noodles to cheaper ones, or instead of buying filet mignon, you buy a cheaper, , cut, in the case of the beef. But you can not do that with a number of other services that you are depending. For private education, you don’t move your kid from school to school because the price went up.

So, that’s the part of the story that is absent in the more neoclassical and especially the Austrian/libertarian type of analysis. And here I would like to make a note. I grew up in a time when if you were a libertarian, you were a left wing anarchist. And they were very noble people.

Now they use the word libertarian for these type of clowns, that only want the state to withdraw from any type of intervention in the economy or the society.

[00:47:43] Steven Grumbine: That, is a brilliant point. I appreciate you saying that as well, because the classical libertarian that they’re talking about these days are along the lines of Ayn Rand, and makers and takers and the good guys, and then those moochers.

The whole concept is so convoluted and hateful. It’s just literally based in hate. Hate for fellow man, hate for everyone’s shared prosperity. I’m a collectivist, personally, and the more I see these fits of self-indulgent greed grabs, it makes me realize how far away we are from any form of- I know the word socialist is loaded- but any kind of socialist revival.

You look down at Argentina- and to nota bene, my ex-wife was Argentine, and so I had a little bit of a background there, I got into soccer as a result, err… futbol. But in reality, this is a case study, quite frankly, in what’s at stake, in terms of paying attention and being aware of your surroundings and having agency outside of these systems to fight back. Because right now you’re looking and folks are left as atomized individuals, just by themselves trying to fight a system that’s so massive and so oppressive, that they’ve got nothing. And then sadly, the professional managerial class, these economists who speak to Wall Street, and speak to hedge fund managers, and speak to all these other folks that enjoy this, that live for this and see this as an investment opportunity.

They have no champions. It’s guys like you who I’m really, really proud and happy to get to talk to. Guys that have this understanding. I want to take that concept that I was just laying out there and maybe roll forward what is happening in Argentina right now, and to its logical conclusion.

The people are, scattered. They, they don’t have the resources. They’re up against forces that are enormous. How does Argentina come through this? Lay it out for me.

[00:50:16] Daniel Kostzer: Well, you know Argentina is a country that, if we would think in the origin of why we ended up like this, I could say because Argentina never solved the problem or the intra-capitalist conflict of defining the pattern of accumulation. What do I mean by this? In the Civil War in the United States, that was a clash between two productive regimes, yeah?

The export oriented slavery system of the South and the industrial production of the North. And that was sorted out with a war, and with the military prevalence of one over the other. If you think in Japan, when Japan changed the Meiji Restoration, they ended up with a feudal system and they built that what we may consider, although was still being the Japanese empire and the colonies that financed that development, that it changed into, what you may call, a new entrepreneurial class, also was done with violence, with internal war.

When you think in Korea, why Korea ended up the ruling of the landlords and they moved into the new development, independent of the geopolitical reasons. But Korea did a land reform with the support of MacArthur and the United States. So, the elimination of the landlord, having the land reform, and also a very pro-industrial and bloody dictatorship shaped the new Taipan, you had one model that imposed over the other.

Argentina was always confronted, since the 1850s, between the agricultural export oriented, export market oriented neoliberal model that believed in the comparative advantages and believed in ‘let’s sell everything and let’s buy everything from outside’, versus the industrial autonomous development model that was starting to be followed after World War I, because of the shortages and the constraint. But had its highest development during the ’50s, between ’45 and ’55, when Perón came to government and he believed in industrial development.

He believed in the development of the steel industry, and the petroleum development. And after 10 years of Perón being in power, increasing the purchasing power of workers, more Keynesian, or even you could call it Rooseveltian type of development, came another coup d’etat and the neoliberal export led growth, pro-rural sector model came back, and then we had this pendulum moving from one side to another, and in the ’70s with the aggravation of the inclusion of the financial sector in this type of, model.

So, my impression is that if there is no, I would try to say this gently, imposition of one pattern of accumulation over the other, this pendulum will still go forever. Anyhow, Argentina has proved to be quite a resilient society in general, a society that’s still fighting for the rights of workers.

We have the largest union density in South America. I think that nowadays we even have more union density than the United States. It’s not a virtue, taking into account the United States, although the last increases has us very low, but we have a very complete system of social protection.

The public pension funds cover almost 96 percent of the people in the age of retirement. In the ’90s, we had this experiment of capital accounts that went bankrupt very rapidly and the government had to take over, in order to maintain the people were protected . And even yesterday, with the discussion in the Senate of Argentina, they couldn’t remove the acquired rights of the access to a pension, without having the number of years. Because there was a consideration that, during the ’90s, people were unemployed, not because they wanted to be unemployed, but because of the structural conditions of the economy, or people were non declared to the social security.

So this was a way of recognizing, to individuals, the right of having a pension. So, to put some optimistic approach to this, something that I know is very difficult after watching the voting that was very painful, is that they just voted the law. And according to Argentina legislation, a law can be removed with another law.

So I don’t lose the expectation to have in the coming years, with the right government and winning the parliamentary in the next elections. When people start to get disappointed by Milei, when people start to suffer, they are already doing, but they still only six months of Milei government.

When they start to realize that this is an unfulfilled promise, that we will have a better government that will be able to restore the social protection, the worker’s rights, and all the goodies, sort of saying, of a real welfare state.

[00:56:26] Steven Grumbine: Daniel, thank you very much for this. I know so little about Argentina. I know just enough. to be dangerous, but this has been quite helpful to me. Help us understand, as you’re going out, what your desire, if you will, is for the people of Argentina. Like, if, you were to be able to have the microphone and stand in front of all the countrymen and women of the nation, what would you say to them?

[00:56:56] Daniel Kostzer: The other day I was checking an article I wrote some years ago- I think it was 2009- when we were having, what I would call, a progressive government. What implied to be a progressive economist in those years, right before the the global financial crisis. I wrote something, sorry for the self-reference, when you become older, you start to use your self-reference quite a lot.

[00:57:28] Steven Grumbine: That is okay.

[00:57:29] Daniel Kostzer: Which is not a virtue. But I remember I said, “What does is mean to be progressive?” It means that every single policy recommendation, policy orientation that you aim to, is to reduce inequality, not only to reduce poverty, which can be also agreed on, by right wing neoliberal governments that they are not as insane or as dangerous as Milei or this kind of extreme right wing government.

But the very neoclassical economy will tell you, yes, we want to reduce poverty. So the poverty reduction, I would say, is granted for any good policymaking or simple policymaking ,from any type of ideological approach, but I think for progressive ideological approaches, the reduction of inequality is a key fact. And inequality, it tends to have very corrosive effects in societies.

Again, the thing that I was mentioning to you, Zuckerberg buying a $300 million yacht, or the 56 million that they go to Elon Musk as a bonus. For Argentina, I would like a society where the security, or the police, that is taking care of the rich one is the same police that is taking care of the poor one.

That the school that the rich ones go, are the same as the school as the poor people go. Something that in Argentina happened during long time. We still have public free universities in Argentina, and you will see that from every type of ideological approach, that people come from the same type of university. And the health system that the poor guy has access to, is the same health system that the rich guy has access to, that they can have the same treatment.

It’s a goal. And of course that we restore into our youngster and our younger generations, the hope that the education, that having a job, it’s enough in order to have a decent life. That it’s enough to have a safety net that would allow you to properly survive. That you don’t have to work for 16 hours riding a bicycle and getting tips in order to make your survival.

My hope, nowadays, it’s so modest I would tend to say, but obviously, it goes around more equality and a more even society, because inequality and the big inequality that we are living in, is very, as I say, corrosive for the social net.

And that would also require stronger states, not only to provide social goods and services, but also, not because of the need for resources, but we’d also tax the richer in a more hefty way, precisely to restore part of this equality that would avoid capital flight, that could be inserted in a global context. Where you have some sort of solidarity between countries, in order to avoid capital flight, rather than this race to the bottom that we have now.

That companies, they operate in Argentina, but they have their fiscal address in Montevideo, but they are controlled by one company in Ireland and another in the Netherlands, which are controlled by a foundation in New Zealand that are part of a fiduciary fund in the Virgin Islands. That’s something that, again, induces inequality and reduces the capacity of the national economies to accumulate, to generate jobs and to deliver for everybody.

[01:01:41] Steven Grumbine: That’s very well stated. Thank you so much for that vision. Daniel, where can I find more of your work?

[01:01:47] Daniel Kostzer: Well, I have been writing a bit in English. There are a number of publications I wrote, chapters in books that are mainly from the Post-Keynesian MMT gang. The last book that I wrote is a chapter for the Gower Initiative the UK. It’s an implementation of an employment program, trying to revisit the plan Jefes, years later. There are some things that I wrote in a book with Matt Forstater on social protection.

Again, my writings tend to be much more for daily policymaking, rather than contributions for the universal knowledge, which I’m not very capable of doing.

[01:02:36] Steven Grumbine: Well I think you did a great job today and I really appreciate your time. With that folks, on behalf of Daniel and I, I’d like to say thank you for tuning in. For our organization, we are Real Progressives. We are a 501(c)(3) nonprofit in the United States and we are found on Patreon.com/realprogressives. You could also go to our website, RealProgressives.Org, and donate there. And we also have a SubStack, which is realprogressives.substack.com. And please, by all means, catch us on our YouTube channels and this podcast, which comes out every Saturday, this is an audio podcast, so you can do it while you’re cutting the lawn or driving a car or doing whatever it is you’re doing.

Learn a little something about the world and the economics that impacts you. And with that, on behalf of my guest, myself… with Macro N Cheese, we are out of here.