Tres Ventanas

This is an archived version of the PW Sources newsletter from Saturday, April 6, 2024. Sign up to receive PW Sources directly to your inbox here.


Upon entering office in December, Argentina’s President Javier Milei has attempted a “shock” adjustment—devaluing the peso by more than 50 percent against the dollar in order to reduce the country’s trade deficit. The move has increased consumer prices and dramatically reduced real incomes, unleashing social unrest. 

1968 paper by OSCAR BRAUN and LEONARD JOY diagnoses inflationary policy, stagnation, and the foreign exchange constraint on the Argentine economy:

“It is clear that a major constraint on the economic development of the Argentine is the shortage of foreign exchange and that the policies for development must first aim at increasing the net foreign-exchange earnings. Our historical review has also shown that capital movements add to foreign-exchange difficulties and that policies to maintain the balance of payments should therefore concern themselves also with capital movements. Unless capital exports can be controlled, then devaluation may again be forced by speculators who withdraw their capital from the country as soon as the first signs of balance of-payments difficulties become evident. The lessons of 1962 were learnt by the new Government, which imposed exchange control in April 1964. However, while exchange control of capital movements may be essential for stability, it will not of itself ensure balance of payments at full-employment equilibrium. Moreover, whatever may be achieved by economising in foreign-exchange expenditure, ultimately the greatest scope for raising the growth rate lies in increasing exports. We have not attempted to measure the scope for increasing exports from the agricultural sector, but the general appearance of accumulated neglect of this sector would suggest that it is very considerable. One thing is certain, and that is that the scope for increasing foreign-exchange earnings in agriculture within the next few years is infinitely greater than that for increasing foreign-exchange earnings from the manufacturing sector. While this does not mean to say that we would discourage attempts to initiate or expand the export of manufactures, we do consider that the task of building up export markets and the reputation for a reasonable product will take Argentina a substantial period of time.”

+  “The challenges of Argentina’s external accounts are not due to faltering commercial or economic competitiveness.” Ignacio Juncos in PW. Link. And from December, Maria Haro Sly on Argentina’s relationships to China and the IMF. Read in SpanishEnglish, or Portuguese

+  “The incipient distributive struggle pinned workers and capitalists concerned with the internal market against exporters of agricultural and industrial products.” New on PW, Manuel Cruz, Mauro Gardiner, and Santiago Gahn on the politics of inflation and the balance of payments in Argentina. Read in Spanish or English. And also in PW, Sara Cufré and Gustavo Robles reflect on the nation’s general strike in January. Read in Spanish or English

+  Matias Vernengo and Nathan Perry’s 2017 study of exchange rate depreciation and wages in Argentina from 1882-2009: “The results show that the exchange rate (external constraints) has been the primary cause of inflation.” Link. And see Vernengo’s PW essay from November on Milei’s dollarization proposal. Link


Domestic regimes

KEYI TANG is a Postdoctoral Research Fellow at the Boston University Global Development Policy Center. In a 2021 working paper, she compares the impact of Chinese and World Bank development finance in Zambia and Ethiopia, analyzing how domestic regime type interacts with lender conditionalities.

From the paper:

“The main contribution of my empirical study is two-fold. First, democracy may not always help prevent clientelism but may actually facilitate it under weak institutions. Second, domestic political competition matters more than the external conditionalities set by donors in determining the subnational distribution of foreign aid. While the World Bank’s conditionality may insulate development finance from being captured by elites for ethnic favoritism in some cases, this effect disappears when domestic political competition increases. Under the mounting pressure for political survival, elites face a much shorter time horizon in policymaking and may be willing to take more risks in manipulating development finance as a resource for vote-buying and credit claiming.”

+ + +

+  “Milei’s relationship with the unions will determine the fate of his government.” New on PW, Manuel Cruz, Mauro Gardiner, and Santiago Gahn on inflation and distributive struggle in Argentina. Read in English or Spanish. And new in Portuguese, Pedro Rubin on measurements of debt and poverty in Brazil. Link

+  “Nearly 82% of the workforce engages in the informal sector, and nearly 90% is informally employed.” Tamanna Naseer’s analysis of a new ILO report on Indian employment. Link to the article, link to the report. 

+  A new report on China-Africa trade, foreign direct investment, and African energy access, by Oyintarelado Moses, Dianah Ngui, Lucas Engel, and Abbi Kedir of the Boston Global Development Center and African Economic Research Consortium. Link

+  “Today, there are nearly 12,000 local government financing vehicles (LGFV) in China.” Jonathan P. Sine on the financial challenges of the LGFVs that support China’s infrastructure agenda. Link

+  James K. Galbraith on Bidenomics and voter discontent. Link. And see a 2020 paper by Galbraith and Jaehee Choi on economic inequality and US presidential elections. Link

+  “All industrial policies promote investment by removing or mitigating risks in an environment of fundamental uncertainty.” Chirag Lala on “derisking” and the Inflation Reduction Act. Link. And see a Polycrisis panel on “derisking” in climate policy from last June, featuring Lala, Skanda Amarnath, Melanie Brusseler, Daniela Gabor, and JW Mason. Link.  

+  Magdalena Broquetas and Gerardo Caetano on the far-right in Uruguay: “This electorate also expressed that Uruguayan society—perhaps more gradually than is the case in other Latin American and European countries—is navigating a turn toward more critical views on the functioning of democracy, political parties, and politics.” Link

+  “We have argued that increasing competition between patrons from rival city-states in classical Greece contributed to generating quality-enhancing innovations and rising prices for artists’ works, together with the growing prestige of the same artists within society. Instead, the later Roman Empire developed a larger integrated market that tended to foster mass production and cost-saving innovations, and therefore a general leveling out of prices paid for art over time and across space, with the artists gradually sinking back into the anonymous role of craftsmen. The available evidence on art prices over time and space appears to be consistent with these different paths.” Federico Etro on Greco-Roman art markets. Link

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