Cry for Argentina. Further economic suffering is on its way, and that has implications for the Catholic teaching on the economy under native son Pope Francis.
The recent elections have brought the Peronists back to the presidency. Alberto Fernández won the elections on October 27, defeating the more pro-market Mauricio Macri. Peronists have a decades-long record of presiding over the economic decline of Argentina, to the point even of precipitous collapse.
The pain began less than 24 hours after the election, with the Argentine central bank restricting dollar purchases to only $200 a month, effectively locking Argentines into their rapidly devaluing currency.
The economy which Fernández inherits from Macri is already a disaster on multiple fronts. The economy shrank by 1.7 per cent in 2018, and is projected by Moody’s to shrink a devastating 3.9 per cent this year and a further 2.5 per cent in 2020. Those figures are more severe than the “great recession” that hit America in 2007-2009. Inflation is a staggering 53 per cent.
Argentina has a $100 billion foreign debt that it cannot repay. To prevent a default, Macri secured a $57 billion bailout from the International Monetary Fund just last year. And so for the umpteenth time Argentina and the IMF begin their dance of desperation.
IMF bailouts – which are a regular part of Argentine economic policy – come with a mandate for austerity to get fiscal policy back toward balance. The consequent austerity is painful and thus unpopular, setting up a conflict between the national government and the IMF. Already the IMF has suspended a $5 billion instalment after the Macri government did not deliver the promised fiscal restraint.
Fernández waged his victorious campaign with a promise to resist the fiscal measures called for by the IMF to put Argentina’s finances on a more stable footing. The IMF will continue to insist on fiscal responsibility; the Peronists will reject that pressure, and Argentina will most likely stagger toward another national default.
Argentina is the great delinquent of sovereign finance, needing some 30 relief packages from the IMF over the years; the 2018 bailout was the largest in IMF history. Not that the bailouts have helped much; Argentina has defaulted on its sovereign debt an astonishing eight times, including the mammoth $93 billion default in 2001.
What does all this mean for Catholic social teaching under Pope Francis?
The papal view that “this economy kills” was formed by that Argentine history of calamitous economy policy, in particular the 2001 default with resulted in nearly half of the population falling into poverty.
The view from Argentina is singular. There are poor countries which remain poor, or have only slow growth, and there are prosperous countries which also include poverty. But Argentina is unique in being a rich country that – without war or communism – has become poor due to decades of bad economic and fiscal policy.
When Jorge Mario Bergoglio’s parents emigrated from Italy to Argentina they made that choice because Argentina was then a wealthy country – as wealthy as Canada in the 1930s. Had the Bergoglio parents chosen Canada instead, their son would not have grown up to become the “bishop of the slums”. There are no slums to be the bishop of.
Some of the most moving passages in the biographies of Pope Francis are about his presence in the slums of Buenos Aires. While the “slum priests” were already present in the 1960s, he breathed new life into their ministry, and accompanied them personally. Paul Vallely, author of two biographies of Pope Francis, estimates that Cardinal Bergoglio personally talked to half of those who lived in the slums during his 18 years as archbishop.
That experience inevitably shaped the Holy Father’s thinking about economics. Vallely writes that he became convinced of the immorality of the “excesses of capitalism” and the “idolatry of the market”. Which may well be true, but the Argentine experience is one of government failure, not market failure. It is true that the market “punishes” the poor when insolvency looms, but it is not some impersonal market that brings insolvency, but the bad choices made by government.
Pope Francis has spent a lifetime in a country steadily pauperising itself to the extent that slum priests have now served for more than 50 years. The pastoral question is clear and admirable, to stand in solidarity with the poor and suffering. Yet the policy question – which has implications for Catholic social teaching – is why has Argentina produced so much poverty for so long? Such sustained policy failure deserves a harsh condemnation from the perspective of Catholic social teaching.
Might it be that in condemning an “economy that kills” the Holy Father is speaking more about the president in the Casa Rosada than the financiers of the City?
All biographers agree that the default of 2001 had a deep impact on Bergoglio, convincing him that the entire economic system was a sort of conspiracy of the powerful and influential – both at home and abroad – against the poor. That view may not be sustainable outside Argentina, but it is rather plausible within it. For nearly a century, Argentine economic policy has kept the poor in poverty, and added to their number.
What would be the effect on the Holy Father’s thinking if Argentina defaults for the ninth time, bringing more misery to his beloved country?