Links: Pandemic, Inflation and Transferred Economic Surplus in Argentina
Carlos Fidel[1]
A pandemic is a disease that spreads across vast territories and crosses borders in search of its victims, without regard for social class, gender, or nationality. In the case of the Covid-19 virus, it is transmitted globally through direct contact between human beings, traveling between countries on airplanes, crossing borders in various ways, circulating rapidly through inter- and intra-urban spaces within countries, using means of transportation and taking advantage of all contact between people.
Government measures to stop the spread of the virus include vaccination and implementing public restrictions on people's movement. These measures affect different economic activities in different ways. Most sectors that sell goods and services in person have experienced a decline in sales, forcing many businesses to close. Other activities expanded during the pandemic, especially those conducted using digital technology.
In Argentina, the primary sector was not affected by the pandemic; some products from the agricultural export sector benefited from the rise in international prices.
The amplification and prolongation of the pandemic did not reduce price increases, particularly for products that make up the basic food basket. This demonstrates that the few economic actors who have the power to set prices and profits are unmoved by the social and health situation of their end consumers. For them, the primary concern is maintaining and increasing profits. “extraordinary”, We could say that it is the main motivation that drives their business behavior.
Almost all schools of economic thought agree on define Inflation is defined as an increase in the relative prices of goods and services. It is also agreed that inflation is a "symptomatic" phenomenon; that is, the entire population experiences its effects daily. However, it does not affect everyone equally; the vast majority of people are impacted daily by rising prices, especially in food consumption and reduced access to other basic necessities.
The different approaches to economic theory No. They agree in explaining the causes of inflation.
For reasons of length, we will leave aside some "rustic" explanations expressed in certain media outlets.
Monetarist approaches to inflation focus on the fact that excessive public spending based on the issuance of currency leads to an excess of the money supply in circulation, stimulating the population's "Demand" to spend, encountering a "Supply" that responds by raising prices.
According to this school of economic thought, how does the problem of inflation get solved?
These economists argue that the root causes of inflation must be addressed. Since their results take time, the immediate solution is to use monetary instruments to "dry up" the market of paper money, which will reduce solvent demand. Consequently, prices will stop rising and may even fall.
These monetarist prescriptions were applied many times in Argentina, most often as adjustment measures mandated by the IMF (Fund for Misery and Inequality), an organization comprised of 184 countries but dominated by a few, with the US holding sway. A critical analysis of the IMF's operations can be found in the book "Globalization and Its Discontents" (Taurus, 2002) by Nobel laureate economist Joseph E. Stiglitz.
In Argentina, the application of these monetary instruments to adjust the economy and combat inflation had an unequivocal result: increased poverty, rising unemployment, and widening inequality. The aforementioned monetarist approach was used during the period of administration by the Cambiemos alliance, culminating in 2019 with an inflation rate of 53,8%, the highest in the last 28 years. This demonstrates the inconsistency of monetarist theory; moreover, during that period, the outflow of surplus funds through financial channels and international trade was encouraged and permitted.
Another approach, called “structuralist,” focuses its analysis on the productive structure and the country's integration into the global market. In the productive sphere, they point out that the existence of unregulated monopolies, located in some phases of the production process, gives them the power to raise prices, increasing the profit margin either temporarily or permanently, which in turn affects the final prices paid by consumers.
Within this school of thought, we maintain that the inflationary process stems from the effect of multiple causes, which can change depending on the circumstances. What remains constant is the existence of a few business actors seeking to expand their profit margins, who, based on their monopolistic positions, absorb a surplus from the real economy in their pursuit of maximizing their profit rates.
In Argentina, many businesses set their prices and profits in dollars, even though most of their inputs are local. If international prices fluctuate, they adjust their prices as well, even if their production is destined for the local market, as is the case with many food products. Thus, in the distribution of theeconomic surplus"They keep a considerable portion of the total surplus generated in a production cycle."
In the mid-20th century, the American economists Paul Baran and Paul Sweezy, who shared the same name, jointly dedicated themselves to studying capitalist growth and development. In their work, they defined... “real surplus” such as the difference between what society actually produces and consumes in a given period. Meanwhile, they specified to “potential surplus” This refers to what is not produced because efforts or resources are allocated to the production of superfluous goods. Existing forms of production organization prevent the generation of a real surplus, which could be achieved with a more productive form of production and distribution, with less waste managed with an emphasis on social justice.
For the purposes of this note, we propose using the concept of “transferred surplus”, which refers to fictitious goods, services and capital that "slip out" of a national space using various tax evasion and avoidance tools and/or directly through smuggling routes (Argentina has a long history in this field).
One of the effects of the pandemic was the upward trend in global prices for some goods and services, many of which are produced in Argentina. Producers who manufacture their goods domestically try to set their prices for domestic consumption at the same level as in the world market, leading to increased domestic inflation. In many cases, they export through informal channels, such as the so-called waterway, whose concession has been a subject of debate recently. This would be a true expression of what we call here “transferred economic surplus” (Alcira Argumedo: “The Paraná-Paraguay Waterway is a bleeding vein”). https://cdmnoticias.com.ar/2021/04/26/alcira-argumedo-la-hidrovia-parana-paraguay-es-una-vena-que-sangra/).
We propose that before discussing the fairness of the current tax system, there is an outstanding task: to make existing taxes and regulations more effective. In that sense, we must put an end to the complex web of exit channels from the “transferred surplus”. This is a mandatory and urgent challenge for the national government. Its effects would quickly impact domestic price levels, while simultaneously increasing fiscal resources to combat the pandemic. Public measures could also be implemented to transform the "surplus." potential en real, within the framework of a more egalitarian and therefore more democratic society.
[1] Consulting research professor at the National University of Quilmes. Producer and interviewer for the series "Close Dialogues," UNQ-TV and CLACSO-TV. Director of the "Social Sciences Journal, second series," UNQ. Director of the online journal "Urban World," UNQ. Director of the research program "Dimensions and Scope of Territorial Development," UNQ. Co-coordinator of the CLACSO Working Group on Poverty and Social Policies.
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