Act 1. Taking the master’s speech as proper

President Duhalde and Minister Remes Lenicov went to Washington and Monterrey to speak with the key figures in the US Treasury, the IMF and the World Bank. They carried with them a message: that with an impending hyperinflation it was necessary to check the devaluation of the peso; that, to strengthen the reserves of the central bank and avoid the collapse of financial institutions, IMF funding was needed; that, for the moment, provincial and federal deficits were difficult to control. After some preliminary talks, their arguments crashed against a wall of technical reason. All their arguments were rejected as out-moded views or erroneous arguments. And they listened to a new and unexpected set of arguments: The Fund and the Treasury will accept no more false promises from Argentina. In the view of their experts, the Argentine representatives presented no credible and “sustainable plan” for macro-economic stability and growth. Instead of promises of financial assistance, they issued a warning: abandoning free-market reforms and altering contracts and compromises would lead Argentina into an isolationist path that will produce more damage to its people. Half-persuaded by these strong arguments, President Duhalde and Minister Remes Lenicov returned to Argentina and started to speak with the voice of the IMF and the US Treasury. Hence, they started to spread the new gospel: a free-floating exchange rate, inflationary targeting, and macro-economic consistency. Back in Buenos Aires, President Duhalde explained to the TV audience: sometimes a father, in order to keep feeding his family, has to “bend his head” and accept, against his best judgement, the truth of the Other (to take its “bitter medicine”). This subaltern gesture, of course, contradicted his prior statements, because the prescribed policies fundamentally questioned the validity of the belief system that united the main partners of the governing alliance (Peronistas and Radicales).

After a long negotiation that seemed to go nowhere, Argentine functionaries found out that the rhetoric of the knowledgeable empire was harsh. Conservative voices were beginning to argue that neither the IMF nor the US should continue to pour money into a corrupt and unviable economy. Secretary of the Treasury Paul O’Neil spoke of Argentina as a land of waste where the savings of American “plumbers and carpenters” could be easily washed away by wrong policy decisions.1Many articles and commentaries picked up on O’Neil’s phrase. See for example The Economist (2001). The suspicion of the American worker was the basis of the duress of the new US policy towards Unwisely Overindebted Countries (UOCs). In this conservative viewpoint, popular common sense taught government to be wary of international bankers and their advisers. They would willingly waste other people’s money in order to save their own interests.

Act 2. Two ideologies in conflict

A long-political and ideological conflict brought about the fall of President De la Rua in December 20, 2001. With him fell the so-called modelo económico implemented first by Minister Domingo Cavallo during the Menem administration (free convertibility between the peso and the dollar, free international capital mobility, government without discretionary monetary policy, privatization of government enterprises, opening of the economy to foreign competition). The defeat of De la Rua-Cavallo was read as the end of the hegemony of a way of understanding economic policy and its effect on economic development (the so-called “Washington Consensus” that in Argentina translated into a “convertibility consensus”). The politico-ideological terrain has long been divided between supporters of economic integration and free-market policies and supporters of regulation, protectionism, state-led development, and re-distributionist policies. De la Rua-Cavallo tried to defend until the end the former model, while their successors (Rodriguez Saa for a week, and Duhalde) promised policies that seemed to satisfy the expectations of the latter camp. Thus, the events of December 19-20 anticipated the re-emergence and potential hegemony of what, for simplicity, I shall call “nationalist-populist reason” at the expense of “neo-liberal reason” and the Washington consensus.

Rodríguez Saa’s announcement of the Argentine default, his promise of one million new jobs, and his televised embrace with union leaders gave Argentines the impression that a great REVERSAL was under way. The same could be said of President Duhalde. His devaluation in early January, his promises to distribute massive unemployment compensations, his announcement of a new “productivist alliance” against the interests of speculators, foreign banks and privatized utilities, and the interventionist policies to “compensate” the effects of this devaluation all created the impression that things would turn around. That, at last, the people had defeated the modelo económico and its rationale and that, consequently, it was time for a redistribution of economic gains and for strong government. The new productivist alliance—it seemed—would increase employment, re-industrialize the country, and put under check the rapacity of foreign companies. If this was so, the winners of the past “neo-liberal age” would have to accept losses for the benefit of the poor, the unemployed, and the economic renaissance of the interior provinces. As it turned out to be (so far), this public perception was disappointed by the sudden “conversion” of their politicians to the refurbished Washington Consensus.

Act 3. New faces on TV

Momentarily at least, mainstream economic experts (most of them trained in US top universities) have disappeared from the TV screens. Although they continue to be called to integrate discussion panels for news-and-commentary TV programs, many of those associated with the words “liberal,” “neo-liberal” or “ortodoxo” refuse to participate in these programs. Their space has been occupied by heterodox economists—some of them neo-Keynesian, others simply expressing the views of the unions or industries they represent, others speaking for opposition and leftist parties, still others carrying the credential of having participated in the cabinets of governments of the 1980s or before. Unlike the US-trained experts, these other economists had studied in local universities and display a technical expertise and common wisdom that some might find insufficient or old-fashioned. Some of these economists are making their first appearances on TV programs, while others are re-appearing after decades of ostracism and neglect. Although they represent a diversity of perspectives, they are in agreement that the modelo económico of the 1990s is over and that their positions (income redistribution, active or expansionary policies, more regulation, taxes on privatized utilities, price controls, and even statizations of foreign-owned banks and oil companies) need to be heard. Their greater popularity speaks of a displacement in public discourse towards positions closer to what I have called “nationalist-populist reason.” The economists that are now appearing on TV screens are putting into debate whether Argentina should listen to the words of advice of the IMF and the US Treasury; whether it is convenient to give up so much (policy autonomy) for so little (fresh loans and tons of compelling advice).

This change in the type of economist now exposed to TV audiences speaks of the crisis of legitimacy of the “Washington Consensus” and its Argentine variant, the “convertibility consensus.” In part the retrenchment of orthodox or neo-liberal economists (which I repeat is only temporary) is founded upon solid arguments: the lack of reception in government circles for their advice, the evident failure of the modelo to generate sustained economic growth, and a bit of fear. Some economists (Roberto Aleman) have been assaulted by small groups of demonstrators, others (Eduardo Escasani) have been subject to public escraches, and still others have been advised to remain uncritical. And, as we all know, Domingo Cavallo is now in prison, arrested on charges of contraband. This Harvard-trained economist may be unfairly paying for felonies that he did not commit, but in the eyes of many of his countrymen he is guilty of the increased unemployment, poverty, and inequality that resulted from the application of policies that were part and parcel of the Washington Consensus.

Act 4. The Washington consensus reconsidered

To understand the meaning of this crisis of legitimacy for the US-trained economist, we must look at the “policy community” in the US and at its changing consensus. Since the Asian crisis (Summer of 1997), the Washington Consensus and its disseminating agencies (the IMF and the World Bank) has faced severe criticism.2See Krueger 1998; Stiglitz 2001; Fisher 2001b, among others. Even a supporter of IMF policies such as Stanley Fisher (1997) had to acknowledge that IMF programs had a limited effect upon the domestic side of developing economies (“few countries seeing significant increases in growth or sharp reductions in inflation”), although the Fund’s policies did produce improvements in the external sector and momentary reductions in fiscal deficits. Leading economists such as S. Fisher, A. Krueger, J. Stiglitz, or R. Barro have begun to openly criticize IMF policies, calling for major reforms if not its abolition. Economists and financial experts have argued that opening commodities and financial markets simultaneously was bound to generate explosive financial crises. That macroeconomic stability was not enough to guarantee the stable and sustained growth of “emerging markets.” That the IMF (with its enhanced credit facilities, and high premium loans, and its insistence on fiscal austerity) had pushed countries into debt traps that led to financial crises and severe depressions. Attacks from left and right have led experts to re-examine the role that the IMF must play in the new global economy. Key experts have argued that IMF large loans to unreliable countries only encourage irresponsible private lending. Others have suggested that, in the future, the IMF should play a much more limited role in the world economy, restricted to “crisis prevention” and “crisis management;” that is, to collect data, give warnings, and provide policy advice (Barro and Reed 2002).

Albeit not the only one, Joseph Stiglitz has been perhaps the most vociferous in this criticism (North 2000; Stiglitz 2001). Since the 1997-98 Asian crisis, he has been exposing IMF policies as “fire added to the fire” (as the main reason for economic disaster and social distress). Instead of stimulating economies with increased social expenditures and an expansion of credit, the IMF had consistently recommended budget cut-backs, monetary restriction, and further de-regulations. These policies have sunk into deep and prolonged recessions economies that had the chance of rapid recovery. His book Globalization and its Discontents (2002) has circulated widely among critics of globalization and international financial institutions. Translated into Spanish in the same year, it has been enthusiastically received in Argentina by supporters of industrial protection, Keynesian economic policies, and the reconstruction of a “national” and “popular” economy. Radio and TV programs have familiarized the Argentine public with Stiglitz’s criticism of the IMF, emphasizing his authority as a Nobel-prize winner. Readers, of course, take from a text what strengthens their own views. Thus, Stiglitz has been locally portrayed as a detractor of the IMF and as a defender of “active industrial policies”—others have gone further, presenting him as a crusader against free-market ideology—while, in actuality, his positions have been more conservative. (True, he has accused the IMF of “lack of intellectual coherence” and has called for major limitations in the role of the IMF; but his understanding of the world economy falls short of falling into the camp of the “nationalist-populist” consensus.)

Over time, this criticism has been eroding the basis of the Washington Consensus. Though many US-trained experts still believe that macroeconomic stability and free-market reforms should not be abandoned, many see now that these two conditions are not sufficient. The consensus has shifted towards the terrain of institutions. Now scholars and policy makers agree that, in addition to free-markets and macroeconomic stability, emerging economies need good government, reliable financial systems, and exemplary judiciaries. In particular, given the frequency of external shocks, countries need to have good bankruptcy laws and (some recommend) some degree of control over short-term speculative capital. Some ambiguities of the earlier consensus (between alternative exchange regimes) have been closed: now only flexible exchange regimes are considered acceptable. The experiences of Mexico, Asia and Brazil have given the Fund grounds for arguing that exchange rate devaluations can prove successful. And arguments about the inefficaciousness of IMF loans (“giving fish to the sharks” as Stiglitz has put it, or in the conservative variety of a “moral hazard” argument) have gained widespread support in the policy community.

Act 5. US economists give opinion of the Argentine crisis

Expert economic opinion in the US is divided regarding the Argentine current crisis. There are those who blame Argentine policy-makers and politicians for the economic and financial collapse. Among them are Professor Martin Feldstein at Harvard, Professor Gary Becker at Chicago, and Professor Charles Calomiris at Columbia. On the other side are those who fault the IMF for the Argentine crisis: Professors Paul Krugman, Mark Weisbrot, and Arthur MacEwan, among others. Those who blame the IMF focus on either its unhelpful or wrong economic advice and its ill-timed financial assistance. The IMF sins are limited to not telling Argentina to abandon its fixed exchange system sooner; or advising orthodox, austerity measures in the middle of a depression. Those who place the blame on Argentine policy-makers (and minimize the IMF’s responsibility) point to the transformation of fiscal deficits into mounting public debt and to the inability to complete the structural reforms needed to make the currency board system work. Their interventions tend to distinguish between economic liberalization (not to be blamed) and ill-advised monetary and fiscal policy (guilty as charged). The positions in the debate are two-sided: either the patient did not follow the doctor’s prescription completely; or the doctor, willingly or by ignorance, provided the patient with the wrong medicine.

In any of the two extreme situations, Argentina stands in a subaltern position vis-à-vis expert (economic) knowledge. Its policy-makers are conceived, in both perspectives, as dependent upon the authorized word of IMF or the “policy analysis” community. Or, put in other terms, Argentina appears always as an “experiment” or an “example” (some use the phrase “textbook case”) of a theory or policy paradigm that is under discussion. Argentina, whether it is the “poster child” of neo-liberal reforms or the “basket case” or IMF folly, stands always as a passive object of knowledge, providing mostly data to feed a vigorous academic and policy debate that goes on elsewhere. Leading scholars and policy-makers in Argentina can argue against the current, but can hardly avoid the protocols of authorization governing “voice” in the US academic and policy community. Yes, at the end of a persistent effort, Minister Cavallo persuaded many of his peers in the United States that convertibility had been a success and could be sustained over time. But in order to do this, he had to publish his views in the most traditional and respected journal of the profession: the American Economic Review. (Cavallo and Cottani 1997).3In this essay, it is clear that Cavallo was running against the current. He acknowledged that key people in the policy and theory community were skeptical about the currency board. But they were ready to accept price stability and good fiscal figures as “proofs” of success. In fact, as Cavallo conceded, no one in the “policy community” raised the issue of rising unemployment at a time in which Argentina seemed to have weathered bravely the aftermath of the Mexican crisis (1996-97). Cavallo’s arguments, to the extent that he used the master’s idiom (he spoke of the strength of an internationalized banking system, of the soundness of macro-economic fundamentals, and the resilience of the national economy to global crises), were considered valid, though not completely persuasive.

Few in the US tribunal of expert economic opinion connect Argentina’s failure with economic knowledge or the way this translates into authoritative economic advice. Few of these economic commentators are aware of the impact produced by their own university’s teaching upon the policy-makers of developing economies.4Mark Weisbrot is perhaps an exception in this regard. He argues that Argentina had been mismanaged by US-trained economists and subjected, for too long, to ill advice from the IMF. In the end, a failed experiment (Argentine convertibility), disguised as success, could only bring discredit to those economists who supported it (Weisbrot 2001). After all, their students go to occupy key positions of responsibility as ministers of finance or presidents of central banks. Their students are the ones who generally sit at the other side of the table when the IMF experts dispense advice—and they are those who communicate to the population the “bitter medicine” prescribed by the money doctors. Profound disagreement within the US academy (about the causes of the Argentine crisis) stands in sharp contradiction with the single-voice advice dispensed by IMF experts.

After the crisis of November 2001-March 2002, Argentina is back at the center of interest of economic opinion as a “leading case.” Why has it failed? What were the forces that triggered the collapse? Has the confidence in free-market policies been severely damaged by this event? With the images of supermarket riots (“saqueos“), middle-class citizens banging pots and pans (“cacerolazos“) and youths throwing stones at money tellers in Buenos Aires, US economists return to the laboratory of Economic Science to re-think and re-establish their preconceptions. The essay that Martin Feldstein wrote for Foreign Affairs immediately after these events is symptomatic. Here we encounter not the doubt of the researcher but the certainty of the judge. The case (the financial collapse of Argentina) calls for an attribution of guilt. Without much supporting evidence, Feldstein rushes to indict two potential suspects: the overvalued peso, and excessive foreign debt (Feldstein 2002). If this were so, then liberalizing policies are not to blame. Only the Argentine government is to blame, for it promised something that became impossible to deliver: convertibility at a fixed exchange rate. In the end, the “case” (Argentina) helps to reinforce orthodoxy. If the government would have been able to lower real wages (twisting labor’s arms) or maintain the golden rule of convertible regimes (to reduce the money supply and raise the interest rate) to discipline the economy into cost-reduction “competitiveness,” Argentina would have been able to maintain its convertibility.

What failed, in Feldstein’s opinion, was the political ability and the vision of the Argentine government to adapt national reality to the conditions of the world market. Argentine reality proved stubborn. Even with 15 percent unemployment rates, real wages did not decline. After the Brazilian devaluation, Argentine wages became unrealistically high. But instead of accepting the painful reality (cutting wages to world-market levels), Argentine politicians opted for the easy road: increasing indebtedness. Feldstein draws three “lessons” from the Argentine experience: 1) that a fixed exchange system combined with a currency board is a bad idea; 2) that substantial foreign borrowing is unsustainable in the long run (is a high-risk development strategy); and 3) that free-market policies continue to be desirable, in spite of this sad experience. If in the 1980s Argentina stood as a class example of what could go wrong in the land of “financial restriction,” closed economies, and populist policies, in 2002 the country was again an example–now of the failure of the currency board in countries with too much debt and inflexible labor laws.

On the other side of the argument, there are also prominent public figures and renowned scholars. Best-known among the critics of the IMF is Professor Joseph Stiglitz. But other economists have joined this position arguing that the “Argentine case” is another proof of the failure of IMF policies. University of Massachusetts Professor Arthur MacEwan is on this train. In his analysis (MacEwan 2002), he presents Argentina as a victim of ill-oriented policies, policies that insisted on increasing debt to sustain an outmoded system (the currency board). Bad economic advice comes not from good economic science but from interest. The IMF, trying to defend powerful US corporations and global banking firms, continued to funnel loans to an already bankrupt economy. To Lance Taylor, a monetary policy expert and economic historian, the fall of Argentina must be viewed as a consequence of wrong policy choices (Interview 2001). The fixed exchange rate was good to tame inflationary expectations, but disastrous as a development strategy. In the end, the Argentine case demonstrates the foolishness of opening at the same time commodity and capital markets. Economic growth becomes dependent upon the flow of capital. If successful, the inflow of fresh capital creates price inflation and this generates an overvalued exchange that conspires against local industry. If unsuccessful, capital outflows create expectations of devaluation.

Curiously, in the end, this liberal view coincides with the orthodox one. There is nothing wrong with economic expertise, only with the institutions that represent powerful interests. Liberal and conservative opinion clash only with regard to the desirability of unregulated markets, but they are one in regard to defending the citadel of knowledge. And, what is more important, in one or the other perspective, Argentina continues to be a “case,” an experimental site of policy and knowledge.

How does economic “doxa” pass for knowledge? How is economic theory able to sustain its orthodox core under a storm of counter-evidence? What makes an opinion emanated from Harvard a dominant view? Why is Argentina always a subject of study and object of advice and not a producer of knowledge? These are questions that this essay cannot attempt to answer. Nevertheless, it is useful to reflect on the unevenness of this situation. Certain locations (the subaltern ones) provide the data for experiments in policy while other locations (the dominant ones) provide the theory to understand the success or failure of these experiments. Here lies a condition of subalternity that cannot be solved by improving the quality of the national administration with foreign-trained economists. For the last word remains on the side of those who produce knowledge.

Act 6. Imperial economics

Informal empires can treat their areas of influence with more or less duress, with more or less affection. It depends upon international political conditions and upon the vision and convictions of a US president (or his administration). Thus, when Paul O’Neil assumed a key position as the US Secretary of the Treasury (January 2001), it seemed that the empire would get tougher with regard to those countries that followed “bad policies.” Comply with the economic advice the IMF and the policy community give you or else suffer isolation: this seemed to be the image the new administration wanted to project (“Tough-Love”). This, combined with recurrent expressions by IMF high-level officials that Argentine negotiators were unable to produce a plan (meaning that their technical experts were not able to draw a consistent macro-economic program), created the impression that the time of “carnal relations” between the US and Argentina was over. From then on, distrust, derision, and distance would characterize the relations between the two countries. This was, to a certain degree, to be expected. Few could anticipate, nonetheless, that misunderstandings about economic policy and economic goals would be at the basis of this imperial duress–and, more importantly, that the hegemony of economic discourse would be the source of contention.

Perhaps part of Argentina’s neo-colonial condition is given by the fact that the country has been taken as a site of experiment for economic policy. In the early 1990s, Argentina pioneered neo-liberal reforms in the region, becoming the “poster child” of free-markets, privatization, and macro-economic stability. Since the Asian crisis, Argentina has turned into a “basket case” of poor fiscal management, increasing country risk, and bad international loans. Curiously, few have examined the location from which the judgement of “success” and “failure” emanates: US universities, think tanks, and multilateral credit institutions. The same place where tons of economic and financial advice is produced on a daily basis. Local economists engage in the debates proposed by these centers of knowledge and policy, shifting gradually or suddenly their opinions about policy and doctrinal trends. They are not equal contributors to the world of knowledge and policy: like President Duhalde, they abide with the authorized word of US-experts. Otherwise, they get displaced into the territory of the “dysfunctional.”

Is economics an imperial science? We know that the discipline has tried to colonize other social and human sciences with its maximizing principles and its implicit rationality. But, economic science could be dubbed “imperial” in a more fundamental sense. New work on international finance and economics deals with the question of global governance. Larry Summers, the current president of Harvard University, is an expert on this subject. He has been arguing that the US is the first non-imperialist empire; that US primacy in the field of economics will assure US leadership in the management of the global economy.

In 1999, Summers celebrated the globalization of US economics. US-trained economists were taking control of key positions in emergent economies’ governments and central banks (Summers 1999). There were Berkeley-trained economists in Indonesia, Chicago alumni in Chile, MIT and Harvard graduates in Mexico and Argentina, etc. These economists were spreading the knowledge of how to manage national economies in a globalized environment and providing the rationale for the transformation under way. They were called to assume a central role in completing the globalization process in the terrain where corporations alone could not progress: the reform of government. It was only in this terrain in which the imperatives of greater international integration could be made compatible with the demands of national communities.

US-trained economists will be the ones facing the challenges of a globalized world: they had to find innovative solutions to the problem of reducing financial volatility and the contagion across countries of financial crises. Since the late 1990s, Summers has been arguing for the building of a new “international financial architecture” for the world economy. His views of a pacified global economy is one in which experts dominate and help the rest of humanity cushion the effects of inevitable “market failures.” (Summers 1999). What role does the United States play in this imagined world scenario? To Summers, the US is the “indispensable nation,” the only power that can lead a movement towards international economic integration without causing a major disruption (restructuring) in the nation-state system.[5. Summers is aware of the unevenness implicit in this conception of the world system. Whereas the US government claims absolute sovereignty to control domestic economic policy, other countries should content themselves with a limited sovereignty. Subject to the financial surveillance of multilateral institutions, they cannot entertain the dream of ever issuing world-money. Even if they become “fiscal and monetarily responsible,” the Federal Reserve System will never allow other countries to become new members in the board of directors.] How could this be accomplished? By the persuasive power of economic knowledge. In the end, only the diffusion of economic rationale (“economist want their fellow citizens to understand what they know about the benefits of free trade”) can produce a compromise between promises of democratic governance (widespread public goods) and the recurrent constraints imposed by global financial crises.

The United States has changed the rhetoric of empire. For it is the first “outward-looking,” “non-imperialist” superpower with the energy (its own system of government and its economic expertise) to lead the world to cooperative solutions to its problems (Summers 1998). The new “civilizing mission” is to spread to the four winds the rationale of responsible and transparent government. The new promised land is a financial architecture that resists the pressure of periodic financial crises and a new regulatory system that neither stifles the forces of capitalist enterprise nor destroys the belief in democratic government. The new ideal is a novel compromise between government and market-one that can only be imagined and disseminated by economic experts.

Act 7. Post devaluation blues (Universidad di Tella)

Financial and economic crises take a heavy toll in the university system of peripheral countries (“emergent economies”) such as Argentina. An abrupt devaluation (that multiplies by three the value of the dollar) makes it almost impossible to continue study abroad programs, makes the library cut down dramatically its foreign subscriptions and purchases of books in other languages, makes it quite difficult for professors to attend conferences and congresses overseas or to invite foreign colleagues, and leaves demands for new computers or better internet connections in the basket of Utopia. If the change in exchange regimes is accompanied by a dramatic fall in GDP and employment and by rampant inflation (as is the case now in Argentina), the conditions are given for a dispersion of the Faculty, attracted by better employment possibilities elsewhere. In short, international crises strike at the very foundation of developing universities. A small but growing university, such as Universidad Torcuato Di Tella, is faced with a paralysis, in terms of human and physical resources, if it manages to withstand the collapse of the economy.

Curiously, our university has one of the best economics school in the country. Our professors have been advisers to governments, if not themselves government officials in areas related to economic policy. They have been trained at UCLA, Chicago, Yale, MIT, and other leading economic schools in the US. They themselves fell prey to the trap of the “convertibility consensus” and now form part of the “mainstream economists” who are very cautious to speak in the context of an economic meltdown and high political volatility. Our departments of Economics and Business were at the center of the university.

Now that old-line economic reasoning is called into question, it may be time to re-think priorities. Perhaps re-configuring the curricula of economic majors to include alternative modes of thinking about “equilibria,” “incentive structures,” or “economic performance.” Maybe it is now time for greater exchange among the social sciences and the humanities. Maybe it is time to challenge the master discourse elaborated in US economic schools about what constitutes “sound economic policy” and to re-think the position of authority (and the scarcity of evidence) from which international economists dispense advice to “emerging markets.” Perhaps, as Paul Krugman has recently suggested, if IMF advice would be offered in the market, the price of this service would be very low due to insufficient demand.

Conclusion. The subalternity of knowledge (and how to turn it around)

One of the problems associated with a peripheral location in the world of expertise is not to know the right answer at the right time. In March 1999 (in an address at the Inter-American Development Bank), Summers suggested that the keys to prevent financial crises in Latin America were transparent accounting, corporate governance, and effective bankruptcy regimes. This was the vocabulary of the new science of global governance. Those who did not pay attention to the relationship between information, judicial institutions, and markets were just out of tune with history. This is what happened to President Duhalde and his Minister Remes in their encounters with the IMF, US Treasury, and other experts. If they had been listening to the word of experts in “global finance” and “crisis management,” they would have been better able to understand the non-cooperative stand and duress of US experts. For (guided by an outdated policy agenda) they were enacting policies that were exactly the opposite of those recommended by experts.

The current crisis is first a crisis of governability and public confidence, but it is also a crisis of legitimacy for the policy-expert. Bad economic advice and bad government policy has contributed to a deepening of the economic depression and to create divisions in society. The discredit of past governments that were unable to fulfill their promises of economic improvement and lesser social inequality drags along the discredit of economic advice. The gigantic struggle between supporters and detractors of convertibility has now turned into another gigantic struggle between nationalist-populist and neo-liberal policy solutions. There is a profound disbelief in “expert (economic) reason.” People watch their TV screens in astonishment as representatives of local expertise (home-grown economists) pile up criticism against neo-liberal reforms and orthodox economics. People are beginning to realize that economic predictions are quite frequently in error, that technically sound advice is often politically and socially unviable, and that economists many times represent not just independent thought, but certain narrow corporate interests.

How costly is economic experimentation in peripheral economies? Will a greater dose of economic advice from the center (or a greater number of US-trained economists) spare us from the effects of globalization? Are we teaching our economists to speak with their own voice? Is their knowledge integrated into a broader conception of the world and of the human and social sciences? How should we feed the minds of those who will be managing the global economy from these peripheral outposts? Should they be only producing data for the center and applying policy solutions developed at the center? We need to seriously examine the bi-polarities created by this knowledge structure. Why are arguments about poverty and social inequality unable to penetrate the wall of technical neo-liberal reason? Why is fiscal responsibility anathema for heterodox economists? We need to re-consider the formation and circulation of economic expert advice as a constitutive moment of global governance—and challenge its foundational precepts. We need to examine the broader implications of universal financial and economic recipes, and the denial of locally situated and socially-embedded policy solutions.


In May of 2002, President Duhalde appointed a new economic minister, Roberto Lavagna, an expert who had made a career in the European policy community. Against the double talk of Minister Remes Lenicov (who tried to appear tough as a hyper-regulator but accepted the views of the IMF in every policy issue), the new minister took distance from the IMF and its policies. He let the Central Bank intervene in the exchange market so as to stabilize the currency (something the IMF experts were against), then started to accumulate foreign exchange reserves, delaying the payment of financial obligations to the IMF and the World Bank (a decision that provoked the anger of experts in these institutions). Soon, having obtained some minor achievements in terms of declining inflation and a stop in the fall in real output, the minister started to pursue a new negotiation strategy with the Fund: “we have to be responsible, not obedient.” In Congress, this translated into a series of delaying tactics that avoided “resolving” the problems that the Fund wanted (re-structuring of the banking system, an immediate raise in the prices of public services, the abolition of provincial bonds, and some commitment to re-start negotiations with government bonds), complemented with new bills (postponing bankruptcies and housing evictions) that went against the wishes of the IMF. As the president soon discovered, taking distance from the IMF provided important political gains. So, he began to excel in the practice of appearing committed to a successful negotiation with the IMF and, at the same time, boycotting every possibility for success.

To be fair, one has to acknowledge that from the other side of the window, the IMF leadership (the same as the Secretary of the Treasury) became increasing alienated from Argentina, as they saw President Duhalde taking the wrong turn towards a “nationalist-populist” agenda. In fact, they started to consider that he was missing altogether the train that led to “capitalist development” and “good government.” In the end, perhaps, President Duhalde did not understand (and could not understand) the rules of the economy. The initial misreading of the reasons of empire–an inexplicable rejection of the reasons of the local policy-maker–turned into alienation and mutual distrust. Perhaps, reasons Duhalde, the IMF does not want to sign an agreement. Perhaps, reasons the IMF leadership, Duhalde is no longer truly committed to reaching an agreement. Once the child has gone back to its rebellious state, the father will step up the threat of punishment. In this the imperial father will speak through the voice of local and international experts: if Argentina does not negotiate with the IMF and does not fulfill its international commitments it will “fall out of the world.”

December, 2002

Ricardo D. Salvatore is professor of modern history at Universidad Torcuato di Tella in Buenos Aires. He is author of Wandering Paysanos: State Order and Subaltern Experience in Buenos Aires During the Rosas Era (1820-1860) and coeditor of Crime and Punishment in Latin America: Law and Society since Late Colonial Times and Close Encounters of Empire: Writing the Cultural History of U.S.-Latin American Relations, all published by Duke University Press.


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Many articles and commentaries picked up on O’Neil’s phrase. See for example The Economist (2001).
See Krueger 1998; Stiglitz 2001; Fisher 2001b, among others. Even a supporter of IMF policies such as Stanley Fisher (1997) had to acknowledge that IMF programs had a limited effect upon the domestic side of developing economies (“few countries seeing significant increases in growth or sharp reductions in inflation”), although the Fund’s policies did produce improvements in the external sector and momentary reductions in fiscal deficits.
In this essay, it is clear that Cavallo was running against the current. He acknowledged that key people in the policy and theory community were skeptical about the currency board. But they were ready to accept price stability and good fiscal figures as “proofs” of success. In fact, as Cavallo conceded, no one in the “policy community” raised the issue of rising unemployment at a time in which Argentina seemed to have weathered bravely the aftermath of the Mexican crisis (1996-97).
Mark Weisbrot is perhaps an exception in this regard. He argues that Argentina had been mismanaged by US-trained economists and subjected, for too long, to ill advice from the IMF. In the end, a failed experiment (Argentine convertibility), disguised as success, could only bring discredit to those economists who supported it (Weisbrot 2001).