In scenes reminiscent of the fall of Saigon, the leaders of the government hastily packed their bags and fled by helicopter from the roof of the Presidential palace. Only these were not foreign invaders fleeing from an army of national liberation, but an elected President fleeing from his own people. While the eyes of the world were diverted to the other war in Afghanistan, another war was raging. In the week before Christmas, Argentina was at war. Not a war between nations, but a war between rich and poor, between haves and haves not - a war between the classes.
For the bourgeois press, this was a sudden descent into collective madness. "Argentina collapses into chaos" was a typical headline. Chaos there is. It is the chaos of the capitalist system, of the so-called market economy that was supposed to have solved all the problems of Argentina, under the benevolent auspices of the IMF and the World Bank. More than a year ago observers warned that the austerity measures imposed by the government, in obedience to IMF advice, were likely to lead to a rise in social tensions. Now they have been proved correct.
Argentina's president Fernando de la Rua was forced to resign after thousands of angry and impoverished protesters took to the streets of Buenos Aires in a revolt against the government's handling of a devastating economic crisis. Before he did so, three days of social unrest, widespread looting and police repression left 27 people dead and more than 150 wounded - the majority, poor people fighting for a crust of bread, shot by the police.
We received the following e-mail from a subscriber in La Plata, Argentina:
"The president of Argentina Fernando de La Rua presented his resignation after a massive demonstration of the people that took place in the square of the Plaza de Mayo. After a television communication on December 19 at 11.00 p.m., the people of the city of Buenos Aires poured onto the streets, singing and banging pots, in a spontaneous reaction against the president's speech. By 2.00 a.m. the square was full.
"The next morning people started to get together in the same square and outside the Congress. The police started to repress people who were showing their disagreement by peaceful means. At 4.00 p.m., the people didn't wants to leave the square (that is a symbol of the working class struggle in the 1940s and 1970s). Some people began to loot stores and McDonalds, breaking all the windows of many foreign banks. At 6.30 p.m. the president called for an alliance between the two major parties (UCR and PJ), but the opposition party refused such collaboration. The president at this moment is taping his resignation and tonight the Argentineans will have a new president and elections in the next months. This is a victory in the battle against neo-liberalism."
Yes, this is an important victory. But what has been won is a battle, not the war itself.
The unrest erupted after the country's free market programme turned sour. In the past two years Argentina, long the wealthiest nation in Latin America, has been in the grip of a deepening political, social, and economic crisis. Fernando de la Rua's government was following the standard prescription the IMF gives to economies facing financial troubles: slash the deficit, deflate the economy and hope that investor confidence returns. In fact, far from solving the problems of the economy, these policies made them worse.
At bottom, the problem of the Argentinean ruling class is the colossal power of the proletariat, which prevents them from carrying out the vicious austerity policies dictated by the IMF to the end. In the past few years, general strike after general strike has been called by Peronist labour unions, under the pressure of the working class. This meant that the Argentine capitalists could not stabilise the situation at the cost of the working class - although it did carry out a series of vicious attacks on living standards. Argentina lurched towards a default this year from its $8 billion loan as the IMF imposed ever-tighter conditions. Unemployment soared and now stands at 18.3 percent.
The first wave of riots forced the resignation of the economy minister behind the austerity package, Domingo Cavallo. "Cavallo resigned after he saw 5,000 people banging pots and pans outside his home," a source close to the former minister said. The spontaneous gathering outside Mr Cavallo's flat in the exclusive Palermo Chico suburb of Buenos Aires brought together people from all social classes, who kept up a constant clatter from around 11.00 p.m. on Wednesday until yesterday morning. The pots and pans marches had been preceded by two days of food riots, with groups of up to 1,500 unemployed people breaking into Wal-Marts and Carrefour supermarkets around the country.
"We're coming back and we'll be bringing all our neighbours," screamed Elsa Gomez, a 45-year-old mother of six, to workers at a supermarket at Buenos Aires' most exclusive shopping centre, after her group of shanty town dwellers agreed not to storm the store in exchange for 250 bags of free food. "The real looters are in the government," said opposition legislator Alicia Castro, visiting the protesters at the Plaza de Mayo yesterday. (The Guardian, December 21, 2001)
The anger of the impoverished masses finally boiled over in two days of rioting and looting that left at least 22 dead and scores of protesters injured in cities around the country. This was the most severe civil unrest for more than a decade. In Buenos Aires, mounted police fought running battles with demonstrators demanding the president's resignation. Teargas and water cannons were deployed. Several hundred people were in a standoff with police in the central square, Plaza de Mayo. The demonstrators included a middle-aged woman who, despite having had one of her toes hacked off by a horse's hoof, still railed against 'this government's starvation plan'. She was referring to a zero-deficit austerity package imposed by the International Monetary Fund on Argentina, which is on the verge of defaulting on its $132 billion (£90 billion) foreign debt. "'Argentina is empty,' said another protester. 'My children want to leave this country, there is no future here, our politicians are too corrupt.'" (The Guardian, December 21, 2001)
Among the dead was a 15-year-old boy reportedly shot during the riots in Santa Fe province in the country's west. Other victims were thought to have been shot by shopkeepers trying to deter looters by firing into the crowds. In Buenos Aires, a police officer guarding the doors of the congress from demonstrators trying to storm the building was killed by a paving stone hurled by a protester. The unions called two general strikes.
The leaders of the Nation were besieged inside the congress building. "We are bunkered in here," said a TV journalist broadcasting from inside congress. "The legislators can't leave and nobody can get in." (The Guardian, December 21, 2001) The president at first wanted to cling to office and only resigned after opposition parties refused his request to form a coalition. In a desperate attempt to hang onto power, Mr De la Rua had spoken to the nation, asking the opposition Peronist party to join him in forging a new economic programme to "assure social peace". He had pledged to continue at his post. "I will carry out my duty until the end," he said. But the terrified Peronists refused to accept the poisoned chalice. If De la Rua had not stepped down when he did, Argentina faced revolution. Neither the declaration of a state of emergency, nor the bullets and tear gas of the police served to intimidate the masses. United in action, they developed a sense of their own collective might. Power was slipping out of the hands of the state and passing to the streets.
A global crisis of capitalism
The main fear of the bourgeois is that the crisis is unfolding simultaneously in every sector of the world economy. The word "contagion" is being used to describe this phenomenon. This is the other face of globalisation. In economics, as in politics, US imperialism is faced with the equivalent of bushfires everywhere. No sooner do they put out one fire, than another one flares up with even greater intensity. This is in itself a graphic expression of the nature of the present epoch.
The crisis in Argentina did not originate there. It reflects the global instability of world capitalism. The collapse in Turkey at the start of 2001 immediately affected the Polish zloty and the Brazilian real, which suffered a devaluation of about 30 percent in the course of the year. This placed unbearable pressure on Argentina, its most important trading partner, whose exports were rendered completely uncompetitive.
Since the Argentinean peso is tied to the US dollar, devaluation was (theoretically) ruled out. Thus, the whole weight of the crisis was placed firmly on the shoulders of the Argentinean workers and the middle class. This had serious social and political repercussions. There had already been a number of militant general strikes in the course of 2001. There was a massive protest vote in the general elections, and even an insurrection in the northern town of General Mosconi where the unemployed and the workers took the running of all public affairs into their own hands. This was causing concern in Washington, where the IMF initially provided funds to help to prop up the Argentinean economy. But now events have moved far beyond that.
The decision to introduce dramatic bank controls led to a run on the banks. On November 30, the country's banks lost $1.3 billion. The central bank's net reserves slumped by $1.7 billion. Overnight, the country, which was one of the richest in the world, is bankrupt. Finance minister Domingo Cavallo once more went with his begging bowl to the IMF but was received in Washington with stony faces. The IMF, having already provided Argentina loan arrangements amounting to $48 billion in the last year, had no intention of throwing good money after bad. Argentina was left to sink under the weight of its own debts.
The economy was now in a state resembling a dying man with a high fever. Interbank interest rates were pushed up to 1,000 percent. High interest rates helped to plunge the economy further into a slump that already had all the hallmarks of a deep depression. The country was in a fatal downward spiral, where cause becomes effect, and vice-versa. A shrinking economy means falling tax revenues, which means both a further curtailment of public spending and higher interest rates, and so on, until the bottom is reached. Unfortunately, the bottom is nowhere in sight yet.
Exchange markets were closed on the orders of the central bank to prevent a collapse of the financial system. Even if Argentina were to attempt to pay its debts by surrendering its reserves, it would only have enough to last until "the middle of the next quarter", according to a report by Suisse Credit First Boston investment bank. Probably even this estimate is too optimistic. But in reality, there is no possibility of Argentina paying its debts. The Argentine economy stands on the brink of a horrendous collapse and default, which can have serious effects throughout Latin America, and on a world scale.
The crisis in Argentina has sent tremors through the international markets. Markets across the world are watching to see whether the crisis would have a domino effect in other economies in Latin America and further afield. The initial reaction of the economists, especially in the USA, were predictable. They claim that the crisis in Argentina is a purely local affair which will have no discernable effect elsewhere.
In Washington the White House said it saw few signs of financial contagion from the crisis. It reiterated its position that the new authorities should work with the International Monetary Fund to develop a sustainable economic programme. But it was the IMF and its policies that brought about the present crisis. Fears that the economic crisis could spread have been dismissed by the White House, which displays the same staggering ignorance of world economics as it does in the field of world politics.
"It does look like it's isolated to Argentina, and that's a helpful fact," said the White House spokesman, Ari Fleischer.
However, such a complacent view does not conform to the facts. So far, there have been few signs of the contagion that shook markets after the default and devaluation crises of Mexico, Russia and Brazil in the 1990s. But a default by Argentina would be the biggest in history. Abandonment of the currency board system is also likely to have uncertain consequences. A severe devaluation of the Argentine peso will harm Brazil - Argentina's main trading partner. And the effects of this instability will hit other so-called emerging markets. Already it has caused a sharp decline of the South African rand, and the tremors are reaching Hong Kong. The Guardian (December 22, 2001) warned: "Wall Street has so far largely ignored events in its own economic backyard. But Argentina is not an inconsequential economy. It is inconceivable, in a global economy, that its effective bankruptcy will not have knock-on effects. As ever, the most painful of these will come from unexpected directions."
Latin America is now in the deepest economic crisis since the war. There is not a single stable bourgeois regime from Tierra del Fuego to the Rio Grande. The objective conditions for socialist revolution have been ripe in the ex-colonial countries for at least half a century. In fact, they are rotten-ripe for revolution. Decaying capitalism threatens to plunge one country after another into barbarism. There is no way the imperialists can stop this, no matter how many bombs they drop. The reason why the revolution has not succeeded so far is not the strength of imperialism but the weakness of the subjective factor: the absence of a real revolutionary party and a leadership.
This can be seen clearly in the mass revolutionary movements which have already taken place in a number of countries in the last few years, for example: Indonesia 1998, the Ecuadorian revolutions of 2000 and 2001, the movement against water privatisation in Cochabamba, Bolivia, in 2000, the uprising in General Mosconi, Argentina, in 2001, and the more recent Algerian insurrection. A common feature in most of these movements have been the setting up of popular committees representing the different sections of the oppressed which have challenged state power and started to replace it. In the case of the Ecuadorian revolution, the People's Parliaments won over a section of the Army to their side (including some officers) and actually took power for a few hours. Only the lack of leadership prevented the extension and generalisation of this movement and thus frustrated the revolution.
Peronists powerless
De la Rua was forced to resign halfway through his term of office. Arriving in office in 1999 on a campaign based around the slogan "I know I'm boring", Mr De la Rua had promised to end the corruption under his Peronist predecessor, Carlos Menem, who drove a red Ferrari and was reputed to have had a string of affairs with Argentine starlets. But Mr De la Rua's own government soon became bogged down in corruption charges similar to those once made against Mr Menem, and his abrupt end in office came with his popularity rating at 4 percent in the polls.
The Peronist party, which controls both houses of congress, began deliberations to work out how to pick the country's next president. Under the rules, an assembly of federal congressmen and provincial governors should pick one of their own to serve out the remaining two years of the presidential term. But many Peronist leaders believe a general election must be called within 90 days to give the next president enough authority to deal with the crisis.
De la Rua will be replaced provisionally by Ramon Puerta, the Peronist president of the senate, until the national congress chooses a successor to rule the nation until elections are called. But these manoeuvres at the top will solve nothing. The people are demanding bread and work. But none of this is possible without a fundamental change in society. The economic crisis worsens by the hour, and the helpless Peronists can do nothing to halt it. What is required is the transference of economic power from the big banks and monopolies - both foreign and Argentinean - to the people.
The Peronists will rule until early presidential elections are held, probably in March. But they have no answers. The leaders of the country are disoriented and do not know what to do: "Convertibility no longer exists," said Rosendo Fraga, a political analyst in Buenos Aires. "But there is no consensus yet on what to replace it with." In the end, the Peronists will have no alternative but to carry out a default - or, as they put it more delicately - a foreign debt moratorium and a "controlled devaluation" that are expected to become the cornerstones of the interim administration's economic programme.
The interim government is also expected to unhook the Argentine peso from its 10-year-old one-to-one parity with the US dollar, a "convertibility" that temporarily solved the problem of high inflation, but which has made agricultural and industrial exports highly uncompetitive. There have been suggestions that Argentina could announce a one-year freeze on payments of its crippling $132 billion (£90 billion) foreign debt. Peronists blame the dollar parity for massive layoffs that sent unemployment to nearly 20 percent in recent years. There is no doubt that it has seriously aggravated the crisis. The servicing of its debt has been costing Argentina some $8 billion a year, and some leading Peronists have long been demanding a moratorium to make that money available for attending the country's social ills.
Investors are preparing for the worst. "Devaluation looks like a foregone conclusion and a complete cessation of debt payments for a lengthy period now looks inevitable," said Neil Dougall, Latin America economist at Dresdner Kleinwort Wasserstein. All understand that devaluation is now inevitable - as is default. But on a capitalist basis, such measures will solve nothing. Argentina will still remain under the pressure of US imperialism. And a devaluation of the peso will mean a return to inflation, which will destroy the savings of the middle class and erode the value of wages and pensions, plunging the population into even greater poverty, and preparing new social explosions.
The Peronist movement is riven with contradictions, which will soon come to the fore. Already a battle is opening up on the issue of finding a permanent successor to Fernando de la Rua. As it becomes obvious that the Peronists have no answer to their problems, pressure will build up for the Peronist unions to call a general strike.
What next?
After the disturbances, most Argentines are returning to their routines - or trying to do so. Slowly, the streets of Buenos Aires are returning to some semblance of normality. But no genuine equilibrium can be reached. The Guardian's correspondent reported on Saturday, December 22: "An eerie calm hung over the devastated shopping districts of Buenos Aires last night, as the promise of a change in leadership appeared to deflate the popular rage prompted by the outgoing administration's austerity measures. As relative calm returned, the state of emergency was lifted."
People are blaming the riot police for overreacting to what were at first peaceful demonstrations. The army is silent; the political establishment in a state of shock. The atmosphere remains tense, the masses sullen and distrustful. The people have immediately realised that the change at the top will solve nothing: "If the Peronists return, then we're back where we started," said a woman cheering the president's resignation. "Menem, De la Rua, they all drink from the same glass of wine," said a neighbour. "Nothing is going to change."
For a time, the masses will watch and wait. The first wave of anger has probably exhausted itself. But what we have here is not peace but only a temporary and uneasy truce. The same distrustful mood exists in the middle class. The same article reports: "Some shopkeepers were too scared to reopen yesterday. 'Many of the looters were our regular customers,' said one shocked grocery store owner. 'This is total anarchy.'"
With the police absent from the streets, neighbours took the law into their own hands, beating looters with sticks. There is a need for order, but on the present basis, no order is possible, only new shocks, crises and chaos. The only lasting order that is possible in Argentina is a revolutionary order, based on the assumption of power by the working class, in alliance with the small businessmen, the small farmers, the unemployed, the women and the youth.
The central slogan of this new power is the general strike. But the general strike must be organised and prepared. The only way to guarantee that the movement will take place in an organised manner, with no rioting and looting, is through the creation of action committees, elected committees of the workers, which must be broadened to include the elected representatives of the unemployed, the small shopkeepers, the students, and all elements of the population except the exploiters.
The committees should organise transportation and the distribution of food and other necessities of life to the poorest sections of the population. They must control prices and patrol the streets to maintain order and fight reaction. In order to fulfil these functions, they will need to acquire arms. An appeal should be made to the soldiers and police to set up elected committees, purge their ranks of fascists and other reactionaries and link up with the workers' committees. Finally, it is necessary to link up the revolutionary committees on a local, regional and national basis, preparing the way for a national congress of revolutionary committees, which is capable of taking power into its own hands.
Argentina has decisively entered the road of revolution. Over the next decade or so, the central contradiction will have to be resolved. The present "transitional" regime will solve none of the fundamental problems, but only lend them a more feverish and explosive character. For the working class and the other oppressed masses, the choice between deflation and inflation is no choice at all. It is the choice between death by hanging and death by slow-roasting over a fire. One way or another, the central contradiction must be removed. No halfway solutions are possible. Both monetarism and Keynesian policies have failed. The policy of dollarisation is now being advocated by bourgeois economists as a possible solution. But the events of the past few months have demonstrated the dangers of fixing the exchange rate. Dollarisation would mean a policy of deflation, with even more unemployment, bankruptcies and misery. On the other hand, a large devaluation would push up inflation, and thus slash living standards through price rises.
Lenin explained the conditions for revolution. The first condition was that the ruling class should be divided and in crisis, and unable to govern in the same way as in the past. This condition now exits in Argentina. The second condition was that the middle class should be in a state of ferment, vacillating between the proletariat and the ruling class. In the recent street demonstrations, many of the participants were middle-class Argentines, who see themselves threatened with ruin. The third condition is that the working class should be prepared to fight and make the greatest sacrifices to change society. The recent street battles showed that the workers and youth had lost all fear of the police and the state and prepared to fight and die if necessary, to defend their just cause.
The final condition was the existence of a genuine Marxist party and leadership, ready to lead the movement and provide it with a perspective and programme. If such a party existed, with serious roots in the working class and above all in the unions, the movement towards socialist revolution could be accomplished quickly and with a minimum of violence. In the absence of such a party, the crisis will assume a more long drawn out and convulsive character, extending over a decade or more, with ebbs and flows, until matters are resolved, either through the victory of the working class, or else a new and even bloodier military dictatorship. However, after the last experience, it is unlikely that a new junta could come to power without a civil war. That is why the generals are keeping quiet - for the time being. The first act of the drama has been played out. But new and stormy events are being prepared.
The Argentinean working class is the most powerful in Latin America after the Brazilian working class. It has a tremendous revolutionary tradition. Armed with a real revolutionary programme, it could easily take power and commence the socialist transformation of society. Such a development would instantly transform the situation in the whole of Latin America. It would have an even greater effect than the Bolshevik revolution in 1917. Its repercussions would be felt in the USA, and on a world scale. Instead of preparing new military interventions against the peoples of Asia, Africa and Latin America, but would be faced with revolutions everywhere. Only a radical reconstruction of society from top to bottom can show a way out of the impasse. In the coming period, the question will be posed bluntly: either the greatest of victories or the most terrible of defeats. That is the choice before the working class and the people of Argentina.