[Marxism] What Greece Faces if It Defaults

Louis Proyect lnp3 at panix.com
Wed Apr 29 08:45:08 MDT 2015

(Two things not mentioned in this generally useful op-ed piece. One, the 
last graf leaves the impression that Tsipras and the Greeks who voted 
for him are for a Grexit, which is hardly the case. It also refers to 
Argentina's return to economic health two years after it suspended 
payment on its foreign debts but fails to tie this to a commodity export 
boom that all of Latin America began to enjoy. Greece has no such 
prospects in store, especially since the governments prior to Syriza 
allowed the agricultural sector to decline.)

NY Times Op-Ed, Apr. 29 2015
What Greece Faces if It Defaults
APRIL 29, 2015

BUENOS AIRES — WHEN President Adolfo Rodríguez Saá told Congress on Dec. 
23, 2001 that “the Argentine state will suspend the payment of its 
foreign debt,” legislators jumped to their feet with joy. Their cheering 
quickly morphed into a chant of “Ar-gen-ti-na! Ar-gen-ti-na!”

Today, it is Greece, led by a recently elected populist left-wing party, 
Syriza, that is contemplating a similarly drastic unilateral declaration 
of independence from foreign creditors and international financial 
institutions. Economists like Nouriel Roubini, a professor at New York 
University, have long argued that “Greece should default and abandon the 
euro,” using “Argentine-style measures” to prevent “a disorderly 
fallout.” Far from the sky falling in, they say, Argentina’s economy 
soon roared back to prosperity; Greece should follow suit.

But were the years that followed really so rosy for the people of Argentina?

Day 1 of the great experiment was inspiring. Mr. Rodríguez Saá received 
adulation when he went before Argentina’s General Confederation of 
Labor. “I believe in social justice,” the president declared, to 
ecstatic cheers. “I believe in the revolutionary passion of María Eva 
Duarte de Perón.”

The president invoked Evita, the unofficial saint of Argentina’s 
descamisados, or “shirtless ones,” to distance himself from the 
free-market shock doctrine of his Ferrari-driving Peronist predecessor, 
Carlos Menem, who was president from 1989 to 1999. Mr. Menem privatized 
state assets and liberalized labor laws, but failed to place any social 
safety net beneath the growing army of the unemployed when the downturn 

By 2001, the nation was caught in a painful crucible of recession and 
inflation. To Mr. Rodríguez Saá, reneging on a seemingly insurmountable 
foreign debt seemed a much better idea than cutting workers’ wages and 
benefits. It also appealed to Argentines as a rebellious cry of 
independence from the conditions imposed by foreign lenders.

The sense of triumph was short-lived. A week after announcing the 
default, Mr. Rodríguez Saá resigned. Soon, Argentina lurched into 
nightmarish chaos.

Economic activity was paralyzed, supermarket prices soared and 
pharmaceutical companies withdrew their products as the peso lost 
three-quarters of its value against the dollar. With private medical 
insurance firms virtually bankrupt and the public health system on the 
brink of collapse, badly needed drugs for cancer, H.I.V. and heart 
conditions soon became scarce. Insulin for the country’s estimated 
300,000 diabetics disappeared from drugstore shelves.

With the economy in free fall, about half the country’s population was 
below the poverty line. The country’s middle class took to the streets 
by the tens of thousands with pots and pans held high, clanging them in 
what became the echoing beat to Argentina’s 2002 social collapse. “From 
now on, I sleep with my casserole beneath my bed,” said one woman, 
proudly proclaiming her commitment to the protest movement.

A run on the banks had already forced the resource-starved government to 
enact the most draconian economic measures in Argentina’s history. 
Savings accounts totaling $66 billion were frozen across the country.

Depositors started protesting inside banks. One man went into a bank 
with a stick of dynamite, demanding his savings to pay for a medical 
operation for his seriously ill wife. Soon, most of Argentina’s banks 
were boarded up with thick wooden panels, on which depositors angrily 
banged their pots and pans.

Well-off Argentines could get around the restrictions. In back rooms, 
large account holders were able to unofficially withdraw thousands of 
dollars at a time, or even wire their savings abroad through a growing 
black market.

For the rest, hundreds of barter clubs popped up around the country. 
Some were the size of shopping malls, set up in the abandoned hulks of 
closed factories. Thousands of cashless and hopeless Argentines flocked 
to them. One opened across the road from Alto Palermo, one of the 
showiest shopping malls built during the free-market ’90s.

At makeshift stalls, haircuts were traded for psychoanalysis sessions, 
apple cakes for clothes. By early 2002, the network of clubs was 
enrolling tens of thousands of glum-faced members every week. When the 
supply of pesos dried up because of the bank freeze, some of the biggest 
of the barter clubs began printing their own currency, the crédito.

Eventually, Argentina did recover. By 2004, the economy was booming 
again under a new Peronist president, Néstor Kirchner, who stared down 
the International Monetary Fund and applied his own brand of economic 
common sense.

It may fall to the historians to decide how much of the crash was 
attributable to Argentina’s defiant default and how much to the 
irresponsible application of the Menem era free-market reforms. But the 
price of the default was brutal for those who lost everything, most of 
them from the lower middle class, who did not have the resources to 
survive the freeze on bank withdrawals. Many cash-strapped families were 
forced to sell their homes at ridiculous prices to the better off who 
still had access to ready money.

Greeks would do well to realize what may follow if they back a 
Syriza-led default and leave the eurozone. They may be stamping their 
feet for Prime Minister Alexis Tsipras today. Tomorrow, they could be 
banging their pots in protest.

Uki Goñi, a contributing opinion writer, is the author of “The Real 
Odessa: Smuggling the Nazis to Perón’s Argentina.”

More information about the Marxism mailing list