Argentine Austerity: Social Cost Climbs

With Argentina’s languid public services approaching total inertia, there have been newspaper headlines this week noting that Argentine Airlines is not on strike.

That was the good news for a nation caught up in railway stoppages, post office walkouts and slowdowns, along with strikes by doctors, teachers, court workers and other civil servants.

Along with other near-bankrupt Latin American countries, Argentina has imposed a strict austerity program, reducing inflation by nearly two-thirds in September. This time, the government vows, it will stay with it.

But as elsewhere, the social cost is high: further erosion of paychecks, plunging retail sales and a surge in unemployment to 14%, the highest since 1974.

Poorly paid public workers have been hit hardest because salaries have lost 20% of their buying power this year. Tired of hearing that sacrifice now will bring benefits later, civil servants are furiously resisting the budget-cutting measures--and causing nationwide turmoil in the process.

A million letters are backed up in post offices after weeks of work slowdowns, work-to-rules actions and a series of one-day strikes. The postal workers’ union says 4.7 million pieces of mail are being delayed and threatens an indefinite strike starting Nov. 10 if its demands for retroactive pay increases go unanswered.

“Unfortunately, the public is not fully aware of the situation, and people are continuing to mail their cards and packages as if all were normal,” said Ramon Baldassini, secretary general of the postal union. “But these letters are just sitting and not arriving at their destinations because of the slowdown in the entire system.”

Some Argentines would remind Baldassini that in the best of times, Argentines drop letters in the mailbox with a degree of fatalism, never certain when or whether they will be delivered.

Political Links

The 38,700 postal workers, who earn a minimum salary of $130 a month--up to $350 for supervisors--have vowed to refuse to assist in preparations for the presidential election next May, an indication of the political links between the anti-inflation plan and the protests.

President Raul Alfonsin has been brutally criticized for failing to control inflation. His party, the Radical Civic Union, appears certain to lose the election to the Peronists unless inflation is checked and economic growth appears possible. Most unions are overwhelmingly Peronist.

On Aug. 3, the government imposed the Spring Plan--it is spring in the Southern Hemisphere--and acknowledged that this was the last chance for an economic turnaround before the election. Under an agreement with business and industry, most price rises were held to a minimum, import tariffs were reduced or removed, interest rates were reduced to less than 10% a month and charges for public services were raised 30% in a single blow.

At the same time, Alfonsin pledged to slash state spending, the primary cause of inflation, which reached 27.6% in August alone. This has meant holding down public workers’ salaries and cutting subsidies to inefficient state-owned companies.

Alfonsin has claimed some significant victories: Inflation fell to 11.7% in September and appears likely to be around 10% this month and even lower in the last two months of the year. Workers in private industry, suffering to a lesser degree and aware of the fragile state of the economy, have called no major strikes.

The key to the plan’s success is containing the public budget, especially holding public workers’ salary increases to 4% a month, to the exasperation of state employees.

The nation’s 97,200 railway workers want 40% a month more, not 4%. They paralyzed the entire rail system Monday and Wednesday, affecting a million riders in Buenos Aires alone.