3/20/2024 - Politics and Society

Attack the problem, not the solution

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Poverty in Argentina: 57.4%
The Argentine Social Debt Observatory, belonging to the Catholic University of Argentina, conducted an estimate of poverty, considering the actual variations in wages and changes in income programs and monetary transfers. According to this analysis, the poverty rate was 57.4%, while the indency reached 15% in January 2023. These figures represent significant increases in the previous year's estimates, which were 44% and 9% respectively.In turn, this number could be greater as the INDEC offers closely due to the use of distinct criteria and indicators, as it has been going through in recent years. The main differences between INDEC and ODSA measurement consist of the largest sample of INDEC (25,000 homes, against 6,000 ODSA), and the indicators they use, where the Observatory is characterized by its dimensional spectrum, covering access to health, employment, basic services and dignified housing. In turn, both base their studies establishing the monetary value, in the case of INDEC, of the Basic Food Canasta (EPH) and, in the case of the ODSA, of a basket combined with the consumer price index in food (EDSA).However, by stopping us in the last element of analysis to build the data of poverty - the money - we see that there is a question that should not be left aside: price freeze. Prices are comprised of information and provide information: they are determined by the supply of the existing product and the demand of it. If the study is anchored in a price index that suffers from state intervention, subsidiary policies, currency gaps and delayed inflation, it will show a number of distortion of poverty equivalent to distortion of the price system. In fact, the difference between the real price of things and the consumer price would be completing the state.
Distortions in the pricing system
Starting with the gap between the official dollar and the parallel dollar, the current officialism inherited 160% difference between both prices. This prevented a normal functioning of the economy and its diagnosis was consensued by much of the ideological spectrum: to assume who assumed it, should end the gap, whose damage directly impacted the reserves and the settlement of exports. However, the devaluation carried out by the Minister of Economic Affairs, Luis Caputo (from $366.45 to $800 per dollar) was the target of attacks by multiple spaces, and it is worth asking if the error is devaluation by itself, or the conditions that led to the increase of the parallel dollar, among them, monetary emission.By itself, currency devaluation is in the price system, because the price of the dollar directly impacts the inputs of all sectors: from coffee to large machines. This is a first major distortion as a function of measuring poverty.But the problem doesn't end there. On 10 December 2023, the delay in general inflation rates was at 28.8%, and a delay close to 40% in relation to equipment prices and health medicines (Invecq based on INDEC). On the other hand, energy prices were also below inflation, because of state interventionism: they showed a 65% delay in inflation in the 2019-2023 period. In the transport area, January 2024, the minimum bus value ($77) showed a 36% delay in real terms, the comparison of the same amount of January 2023 (IPC - INDEC). In the electrical energy area, we can see a cost in the rate by MWh of 30USD, while in 2022 it cost 90 USD/MWh; the difference was covered by subsidies and tariff freezing, representing almost 1.5% of GDP (CEFIP - CAMMESA).
Monetary union
The consequences of unsupported monetary emission are mainly shown in the widespread increase in prices and the devaluation of the currency. In our country, we are talking about a progressive increase in emission without support since the repeal of the Tax Liability Act (2004-2009). In percentages of GDP, the CFK I administration issued as a function of financing fiscal and almost-fiscal deficit approximately by 2 points of GDP, its second period for 4 points, Mauricio Macri returned to 2% and the Alberto Fernández management led it, in pandemic and then in 2023, to more than 11% of GDP (OJF & Associates based in BCRA).Therefore, we were faced with a model that changed price freezes and distortions by tax debt, the differential between real price and consumer price was supported by the State, although in reality, by society itself through inflation and the depreciation of its currency.On the other hand, simulations of the Social Debt Observatory (UCA) showed, at the end of 2023, that of canceling the State's support through transfers (AUH, Food Card, among others) to the most vulnerable sectors, the indigence at that time would have risen to 20% and poverty would have reached 49% of the population.
The new monetary policy
The scenario was conducive to the rise of Milei: a speech of economic-physical orthodoxy, reduction of public spending and the state's sting, combined with discursive attacks on political leadership.In their first months of government, not only were they released several prices and the dollar difference was exceeded, but subsidies were eliminated in the form of shock, with announcements of more eliminations in the future. Sectors such as transport and energy have suffered increased content. In turn, it was announced a bill that would penalize monetary emission to finance the fiss, and the surplus was reached in the first month of management.Now, of course, officialism has its imperfections, but is it not macroeconomic stability in the short and especially in the long run, the best way to eradicate Argentines from poverty?The current situation of Argentina does not respond to the false dichotomy between individualism and collectivism. The Argentine collectivism, therefore, had no coherence in its fiscal policies, erosionated the social bases without differentiating between the individual and the collective, supposing to all equally in the inability to imagine and carry out individual and collective projects. The current situation of Argentina simply responds to becoming a country with growth and a rational economy, without inflation or constant impoverishment. There is no need to mention the regional neighbors, but simply back a few years in the time of our own country: in Argentina from the period 2004-2011, the Tax Responsibility Law driven by former President Néstor Kirchner (Luego repealed by CFK I), forced the Executive to maintain some independence from the Central Bank, and limits to the financing of the deficit. It was the last years of low inflation, and, as Agustín Salvia (ODSA-UCA), in his opinion note on the last measurement, the deterioration would begin a few years later (2013-2014), now facing the “end of the cycle of an economic regime of inflation, indebtedness, chronic impoverishment and social inequality”.

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I am a Political Science student at UCA and a quality analyst in the Government of the City of Buenos Aires.

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