May the pandemic not worsen the suffering of the people
Julio C. Gambina[1]
Before the coronavirus pandemic, the situation for most workers—whether formally employed or not, active or retired—was dire, in terms of income and access to rights. This is a characteristic of this era of capitalism and the neoliberal capitalist offensive, built since the end of the 1970s crisis, which manifests itself in falling wages and incomes for the poor, increased labor flexibility and precariousness, and the further impoverishment of the most vulnerable. Despite some attempts to contain the regressive social effects, both nationally and globally, this trend confirms a decline in the living conditions of the majority of society over the past half-century, with a negative impact on nature, affected by rampant extractivism and the plundering of common resources.
That “normality” didn't satisfy us, and we don't want to return to it. However, the presence of the coronavirus exacerbates the regressive effects on the impoverished population, even affecting middle- and upper-income sectors, who are protesting against certain preventive isolation measures. The issue is the widespread partial shutdown of sectors involved in the production and distribution of goods and services, with its limiting impact on access to basic necessities. Returning to normality is the demand that has taken hold in a certain “common sense.” We find it interesting to discuss what kind of “normality” we are trying to return to. For example, in the name of “normality,” wages are being negotiated downwards to keep companies afloat, affecting incomes from 30% to 70% of pre-pandemic levels. This is undoubtedly an adjustment, just as is happening with the rise in prices, especially for food, medicine, and other goods and services that make up the basic food basket. In the case of Argentina, beyond the freeze on tariffs and fuel prices, among other measures to prevent price increases, the latest measurement from the National Institute of Statistics and Censuses (INDEC) reveals a new surge in inflation, which had been declining since December (3,7%), January (2,3%), and February (2%), but climbed again in March to 3,3%.2 incorporating new uncertainties about the near future.
Public assistance policies regarding food and monetary income attempt to mitigate the dramatic effects on an impoverished majority, who are unable to sustain their daily lives during this emergency. An additional issue is the logistical problems of supply, which does not reach all areas and is further aggravated by evidence of rigged purchases and price gouging. Therefore, it should come as no surprise that unmet needs give rise to protest and even mobilization despite the isolation measures, as seen in the context of layoffs; but also to solidarity through community kitchens, soup kitchens in the slums, and forms of self-managed community assistance. The demand for solutions fuels critical perspectives of disobedience or mobilization. In some cases, this perspective is exploited by the discourse of hegemonic sectors that push for a hasty end to the preventive measures involving quarantine. There is strong pressure from businesses to end the isolation measures, which exacerbates the reality of unmet needs among a large part of the impoverished population.
Therefore, economic policy measures are needed that go beyond emergency and subsistence responses to begin a path of transformation in the production and circulation of goods and services. This requires a shift towards a new "normal," distinct from the economic order we had before COVID-19. A starting point stems from community quarantine, from that segment of the population that, due to objective circumstances, cannot comply with mandatory isolation. These sectors and territories must receive adequate financial and material assistance, including health and safety measures and resources, as well as sufficient training and technical-professional support. This will enable them to direct material production towards self-sufficiency and the generation of social production in their immediate surroundings, and even beyond. This will be the foundation of a broader plan to organize the production and circulation of goods and services towards a new "normal" in the socio-economic order. This plan must integrate popular and professional knowledge and is currently being explored through self-managed initiatives across the country.
Where would the resources come from?
The global situation itself is steering the debate toward unprecedented measures that might have seemed impossible in the past. International organizations are calling for countries to ease fiscal and monetary restrictions in response to COVID-19. Urgent measures are being demanded to rebuild public health capacity and to prioritize government investment in scientific and technological development related to healthcare and the emergency. Rather than reducing the deficit, the proposals focus on relaxing public spending controls.
It is the decline in global production that necessitates relaxing restrictions on currency issuance, which was and remains a sacred principle among proponents of mainstream economic thought. This loosening of economic policy is evident in the leading capitalist countries worldwide. The US alone approved an initial package of $8 trillion, along with credit easing and subsidies. Europe, Japan, and even China have moved in the same direction, albeit to a relatively similar degree. This relative easing runs counter to a truth upheld by monetarist orthodoxy, imposed by the reality of the economic and social impact of the crisis.
Not only issuing currency, but also imposing extraordinary taxes on the wealthiest sectors. The dissemination of studies on inequality broadened the consensus for implementing taxation that would narrow the income and wealth gap. In Argentina, the debate has begun, although the scope of those subject to taxation and the amount to be taxed are still pending. This amount must be calibrated according to the needs of the emergency and the aforementioned plan for productive transformation. It is obvious that those who would be subject to the tax are waging a critical campaign, attempting to legitimize their essential role in defining the production process, thus inverting the theoretical logic that capital is a product of human labor.
The proposal recently made to holders of foreign-law public debt bonds opens up a discussion about the use of public resources, especially given the three-year grace period it promotes for principal and interest payments. This proposal, like the restructuring of domestic-law foreign currency debt by suspending payments for this year, opens a debate on the issue of debt. Freeing up resources in the current situation is significant, but it is clear that postponing maturities on domestic-law bonds for one year or those on foreign-law bonds for three years is insufficient. The problem persists, even if an inevitable default is postponed. Some argue that the important thing is the temporary suspension, but it also fosters scenarios that will clash with the reality of an unpayable burden on the economy and society as a whole.
The government's announcements regarding approximately $66.500 billion in privately held debt, representing 20% of the total debt, and supported by a diverse range of parties, including the ruling coalition and much of the opposition, particularly provincial governments, demonstrate a willingness to pay the public debt. However, the new proposal includes reductions in interest (62%) and principal (5,4%) payments, with a three-year grace period. Argentina is offering to exchange 21 bonds with maturities extending to 2117 for private holders. The exchange will involve 10 new bonds: 5 denominated in dollars and 5 in euros, with interest rates starting at 0,5% for the first maturities in 2023, and progressively increasing to rates as high as 4,875%. The proposal involves annual principal repayments from 2026 to 2047, with a three-year grace period (2020, 2021, and 2022). The proposal is open for 20 days, and the outcome of the negotiations remains uncertain. It is unclear what the financial accumulation will be between now and 2023 to generate the conditions for repayment in that year, followed by increasing interest payments from 2025 onward, accompanied by principal disbursements beginning in 2026 and continuing successively until 2047.
A true mortgage. Therefore, the suspension of payments demanded in light of the global and local situation would be more effective, although it does imply a more decisive confrontation with the logic of local and global speculative power. Argentina cannot pay, the government and even the IMF assert, which is why the scarce international reserves must be applied to the emergency and the productive transformation we propose. Grace periods are insufficient without modifying the framework of society's economic organization.
In reality, the willingness to pay was evident from the outset of the new administration with the opening of negotiations with the IMF, which implies recognition of the actions taken by the previous administration. Similarly, a schedule of negotiation offers to private creditors was established. This explains the parliamentary approval to allocate more than $4.500 billion from international reserves for debt repayment under the "Solidarity Law" passed last December. It was the first measure taken to address the emergency situation following the change of government.
We advocate for planned financing that includes monetary issuance, the use of international reserves, a complete suspension of debt payments coupled with an audit involving public participation, and a tax reform targeting large fortunes to support the emergency response and an economic transformation plan. A transformation of the financial system and legislation will also be necessary, along with a set of measures aimed at substantially modifying the production and distribution system. These are definitions that require an accumulation of political power, which today needs to be the basis for a political power-building strategy to curb the threat of further austerity measures affecting the majority of society, but above all, to envision the post-pandemic future. What will society look like once the current COVID-19 emergency is over? What socio-economic order do we aspire to? What kind of normality should guide our reflection on the present and the future? These are questions that extend beyond the immediate needs of sustaining daily life.
[1] President of the Foundation for Social and Political Research (FISYP). Member of the CLACSO Working Group on Crisis and the World Economy. Original article published at: http://juliogambina.blogspot.com/.
2-INDEC. Consumer Price Index (CPI), March 2020, at: https://www.indec.gob.ar/uploads/informesdeprensa/ipc_04_20405E6A626E.pdf (accessed 18/04/2020)
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