Navigating the Leftist Spectrum in Argentina: An Economic Classification of the Kirchner Era

Argentina’s economic policies under Nestor Kirchner and Cristina Fernández de Kirchner were hugely impactful in the country’s recovery and general development, yet the Kirchner administrations are often painted with the same broad leftist brush often used to categorize Latin American governments. This kind of blanketed cataloguing obscures the economic nuances of important features of Argentina’s governance like social safety nets, market openness, and property rights. This report will classify Kirchnerism in a more appropriate context, measured against economic policy in other Latin American countries. Measuring economic policy under the Kirchners with economic policy under Menemism and Peronism for comparison allows for a greater understanding of Kirchnerism as being differently statist, nationalist, or free market than its previous iterations while measuring economic freedom against other countries in Latin America helps to show that economic policy under the Kirchners was, especially in regards to exports and international trade, more market-friendly than economic policy under other left presidents like Chávez in Venezuela or Correa in Ecuador.

The impressive recovery of Argentina’s economy under Nestor Kirchner, the rapid rise of GDP per capita, and subsequent development are attributable at least in part to Kirchnerism’s economic policy. Placing those economic measures into a larger context and economic classification serves to highlight the continuities as well as discontinuities between the economic policies of the Kirchners and those of previous Peronist administrations. This comparison reveals the extent to which Peronism and Menemism have survived in Argentina’s economic policy as well as the impact that some of Nestor’s center-right policies may have had as a result of a more open export economy. There may also be implications for future policy-making, as Nestor’s more open-minded attitude toward international trade and certain private enterprises did not negatively impact the social safety nets or negatively impact the poor, in defiance of Leftist economic orthodoxy.

Methodology

The first step in an economic classification of the Kirchner era will be establishing definitive criteria for the various subcategories of the Left. Before Kirchnerism can grouped as radical left or pragmatic left, statist or more free enterprise, those categories must be defined in the context of Latin America. Defining these subcategories is helpful in discerning in what way Kirchnerism is a continuation of Menemist and even Peronist economic policy. This will be accomplished by using paradigms from the center left and far left as benchmarks from which to measure the Kirchner era.

After defining subcategories of the Left, trends in economic policy will be established within the timeline of the Kirchner era using the Economic Freedom of the World: 2015 Annual Report. The Annual Report details the change in economic freedom from 2005 to 2013 in key areas of policy and clearly outline which of those areas veered left, stabilized, or even moved to the right. I shall expand upon the specific policies behind the changes in economic freedom in smaller subgroups as well as the larger policy areas more generally. Governmental size, property rights, inflation control, and regulation will be covered more generally as the vast majority of subcategories within those policy areas uniformly moved to the left while international trade, foreign investment, and commerce will be dissected into their component parts due to their strong degree of variation.

Once the various iterations of the Left have been codified and economic policy movement in the Kirchner era explained, I shall explain how Kirchner’s policies compare with those of other Latin American leaders and highlight similar left-leaning patterns with regards to neoliberal social safety nets and inflation stabilization through state intervention as well as contrast the stark differences in regards to international trade tariffs, certain regulatory barriers, and the emphasis on Argentina’s export economy.

Finally, I shall provide evidence, citing similarities with Peronism domestically and differences in international economic policy in other Latin American countries, that Kirchnerism is a more protean incarnation of Peronism with a pragmatic approach to international trade and exports.

Defining the Latin American Center Left

Luiz Inácio Lula da Silva is perhaps the best contemporary representative of the pragmatic, more market-oriented neopopulism in Latin America. Despite calls for redistributive policies in Brazil, Lula consistently pushed strong neoliberal policies in line with the more traditional Washington Consensus orthodoxy, emphasizing fiscal discipline and trade liberalization (Weyland, 2010). Continuing the market-oriented policies of his predecessor, Fernando Henrique Cardoso, Lula’s administration focused a great deal on centrist macroeconomic policy at the expense of social policy. Between 2005 and 2010, government consumption and transfers and subsidies dropped significantly, top marginal tax rates were cut nearly in half, revenue from trade rose, and credit and labor markets were deregulated (Fraser Institute, 2015). Regulatory trade barriers were slashed and compliance costs were minimized as a result of Lula’s emphasis on scaling up the Brazilian export economy. Prioritizing fiscal health and monetary stability over redistribution and social welfare places Lula firmly in the Left’s pragmatic camp.

Defining the Latin American Far Left

Hugo Chávez’s Venezuela, the radical leftist analogue in Latin America, set economic policy characterized by extreme statist control and continued oil dependency, making him a good representative of a paradigmatic radical neopopulism. Chávez’s approach also emphasized huge fiscal and discretionary spending (Weyland, 2010). Revenue from domestic oil production aided in the redistribution of wealth enacted through Chávez’s hyperpopulist social programs. Mass land reform and worker-controlled cooperatives were implemented as a means to transfer political and economic agency to the public. Chávez more generally cultivated a business environment unwelcoming to private enterprise. Chávez’s Venezuela was prone to nationalization of businesses with little notice including the utilities sector, construction, communication, steel, rice processing, and others. According to Weyland’s The Performance of Leftists Governments in Latin America, “Essentially, Venezuela has experienced a dramatic expansion of the state in almost every domain of the economy through nationalizations, firm buyouts, expropriations, direct subsidies, special credits, heavy spending, and business-unfriendly regulations” (Weyland, 2010). These policy directions seem to affirm that Venezuela under Chávez adhered strongly to a radical, statist ideology of the far Left.

Statist Trends in the Kirchner Era

The economic legacy of the Kirchner era falls somewhere between the two extremes. In many respects, economic policy under the Kirchners adhered closely to the more traditional statist approach in Latin America. From 2005 to 2013, the years of the two Kirchner administrations included in the Fraser Institute’s Economic Freedom of the World: 2015 Annual Report, many facets of economic policy echoed the leftist ideologies of previous leaders. The top marginal tax rate increased dramatically, property rights were less respected, and inflationary policy as a result of government consumption and overreach was much less constrained than it was in 2000 (Gwartney, Lawson, Hall 2015: 31). Regulatory costs grew higher throughout the late 2000s and inflation shot up. In terms of credit market regulation, state ownership of banks persisted and interest rate controls, originally free from state influence, were now controlled by the Central Bank (Gwartney, Lawson, Hall 2015: 31). Labor market regulation generally grew stronger over the Kirchner era, with hiring and firing regulations as well as the minimum wage and union strength dropping several points in the Economic Freedom Index (Gwartney, Lawson, Hall 2015: 31). Business regulations also grew more stringent, with administrative requirements and bureaucracy costs making private enterprise more costly (Gwartney, Lawson, Hall 2015: 31). All of these regulations and statist policies are in line with the more traditional far Left in Latin America and Argentina’s low Economic Freedom Ranking in at the end of the Kirchner era, 151 out of 157 sovereign states measured, reflects that clearly.

Free Market Trends in the Kirchner Era

However, in several important ways the Kirchners deviated from the Latin American leftist orthodoxy during their time in office. A departure from Perón-era protectionism, Kirchner’s trade policies were better suited to the globalized economy of the early 2000s (Wylde 2011, 448). Unlike Perón and Menem, Kirchner was much more focused on bringing down the international debt and, to that end, paid back its several billion dollar IMF debts as soon as the country was able. This served to both end IMF influence on Argentina’s international economic policies as well as break, at least in theory, Argentina’s seemingly endless cycle of large recurring debts (Wylde 2011, 449). In addition to scaling back Argentina’s debt, Kirchnerism also placed huge importance on developing Argentina’s promising but underdeveloped export economy. Through careful maintenance of a stable and competitive real exchange rate (SCRER), incentives were introduced in the trade sector and foreign investment was encouraged. According to Christopher Wylde’s “State, Society, and Markets in Argentina,” “Peronismo was based on ISI, and therefore largely closed to external economic forces through tariff and non-tariff barriers (NTBs). Kirchnerismo stands in stark contrast to this model, with active promotion of an open economy through effective state management (Gerchunoff and Aguirre, 2004).” Kirchner’s emphasis on competitive exchange rates and liberalized trade regulations served to bolster the Argentine export economy. In addition to the statist goals and policies embraced by Kirchnerism (see above section), bringing down Argentina’s debt and pushing to strengthen the export economy was also a priority, and one much more in line with the pragmatic left.

Argentina’s Kirchner Era in Comparison

Drawing from Lula’s Brazil and Chávez’s Venezuela as paradigmatic representations of the pragmatic Latin American Left and the radical neopopulist Left respectively, benchmarks can be set from which to better judge the position of Kirchner’s Argentina on the spectrum of Latin American economic policy. In terms of country rankings, Lula’s moderate Brazil falls near the middle of developing countries of the Economic Freedom Index (118 of 157) while Chávez’s radically statist Venezuela ranks dead last (Gwartney, Lawson, Hall 2015: 47, 180). In many respects, Argentina’s economic policies do not differ greatly from the radical neopopulism of Venezuela. In terms of money growth, inflation, freedom to own foreign currency bank accounts, top marginal tax rates, overall respect for property rights, control of capital movement, credit market regulation, labor market regulation, business regulation (with the notable exception of startup costs), Argentina’s economy under Kirchner was decidedly statist and policies veer to the far Left (Gwartney, Lawson, Hall 2015: 31). The rankings certainly reflect this, as Argentina dropped from 110th to 151st in only 8 years. In these areas, the individual sector rankings score much the same as Venezuela’s in the Chávez era (Gwartney, Lawson, Hall 2015: 180). However, there are a number of key exceptions. Kirchner’s policies also reflect a willingness to strengthen the export market by encouraging domestic manufacturing and bringing down the debt. In line with the rankings of the more moderate Brazil, Argentina rates highly in soundness of money, money growth, and standard deviation of inflation (Gwartney, Lawson, Hall 2015: 31). In a more centrist move to encourage growth in the manufacturing sector, Argentina also eliminated most hours regulations, raised generalized private sector credit, and minimized the cost of starting new businesses (Gwartney, Lawson, Hall 2015: 31). While in most cases Argentina cleaved to the far left in line more with the traditional Latin American leftist orthodoxy present in Chávez’s Venezuela, Kirchnerism can also be defined by its tendency to swing to the center, aligning itself more with the Washington Consensus and Brazilian economic policy under Lula.

Synthesis in Historical Context

It seems clear that, while primarily statist in nature, Argentina under Kirchner nevertheless deviated from leftist doctrine when it come to halting cyclical debt and the cementing the strength of the export sector in the international economy. Kirchnerism is, in many ways, a continuation of Peronist policies, emphasizing authoritarian-populist economic policies (Wylde 2011, 440). Unlike Perón, however, Kirchner social spending was always targeted towards a specific social group, never blanketed. Kirchner’s spending policies were more in line with “neoliberal-style safety net models of social welfare” as opposed to Peronist out-and-out clientelism and wider-reaching class welfare programs (Wylde 2011, 441). Real and substantive input from the business elite also informed policy negotiations about organized labor and economic development, a marked break from the Perón era (Wylde 2011, 442). Kirchner’s welfare policies were similar in many ways to those of Menem, who for the most part avoided redistributive tax policies (Wylde 2011, 446). However, Menem’s ‘neoliberalism by surprise’ liberalization policies reminiscent of Eastern European shock therapy economics were far to the right of Kirchner’s statism. In essence, the Kirchner era can be described most accurately as a continuation of radical leftist economic policies in its statist nature, Perónism in its authoritarian populism, Menemism in its social policies, and pragmatic center leftist in regards to lowering the national debt and strengthening Argentina’s export economy.

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References

Gwartney, James, Robert Lawson, and Joshua Hall (2015). Economic Freedom of the World: 2015 Annual Report. Vancouver: Fraser Institute. N.p., 14 Sept. 2015. Web. 31 Mar. 2016.

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Murillo, María Victoria. "Curtains for Argentina's Kirchner Era." Current History (2015): n. pag. Web.

Weyland, Kurt. "The Performance of Leftist Governments in Latin America: Conceptual and Theoretical Issues." Leftist Governments in Latin America Successes and Shortcomings (2010): 1-27. Print.

Wylde, Christopher. "Post-neoliberal Developmental Regimes in Latin America: Argentina under Cristina Fernández De Kirchner." New Political Economy 21.3 (2016): 322-41. Web.

Wylde, Christopher. "State, Society and Markets in Argentina: The Political Economy of Neodesarrollismo under Néstor Kirchner, 2003-2007." Bulletin of Latin American Research 30.4 (2011): 436-52. Web.