Article excerpt

Buenos Aires

It is sobering to witness one of the greatest cities in the world slip, despite its deceptively placid surface, into a state of premodernity. Traffic lights in this metropolis of 12 million people still turn from red to green, newspapers in the kiosks report the latest bad news and Argentines occupy cafe tables, smoke a lot and shake their heads in disgust as they have for centuries. But money has ceased to exist. Oh, there are coins and bills, and cash still manages to facilitate exchange--except when the peso's value oscillates by 40 percent in three days, as it did in March. But money as the basis of a modern, capitalist economy, money that can be lent and borrowed, created or liquidated by central banks, money as the lubricating oil of investment and production--that has disappeared.

In normal times, Maria Esperanza Alvarez, 63, could be fairly considered a bit eccentric, if not a nut case. Standing outside the Spanish consulate where her niece is trying to get papers in order to abandon the country, she confides that for the past thirty years she has kept her savings in a box--thousands of dollars (which were always available) accumulated from her clothing business, which once employed twenty-three seamstresses. Having defied all common and expert sense for three decades, Maria Esperanza now deserves an Einstein award: She never for a moment believed the banks' basic pledge that they would give her back her money when they promised to do so. And she was right.

Lisandro Orlov, by contrast, was more trusting, perhaps in keeping with his professional outlook as a Lutheran pastor. Engaged for years in projects aimed at reintegrating social outcasts--street dwellers, drug users, people facing AIDS-related discrimination--the 59-year-old Orlov lost his pension fund in the December bank freeze-up. Like many Argentines, Orlov assumed that the austere entities in cavernous downtown palaces like HSBC, Citibank and BankBoston would honor their commitments. Now he's fighting in court to regain access to his dollars, already forcibly converted to 1.4 pesos each, or less than half the 3-to-1 rate the greenback now commands on the street.

In December of last year, Argentina's decade-long and highly celebrated experiment as the poster child of monetarist orthodoxy came to a crashing halt. While the International Monetary Fund is not the only responsible party, its spokespeople have now conveniently forgotten their laudatory worship of the main architect of the project, former President Carlos Saul Menem, and the fund's gleeful funding of it throughout the 1990s. The IMF is now forcing Argentines to pay the price of its decadelong collusion with what it now says was a flawed performance all along.

So a once-wealthy country is suddenly seeing its sophisticated middle class driven into the streets, both to protest and to put food on the table. However, this extraordinary descent cannot simply be blamed on the opportunism of the free-trade globalizers. The sacking of Argentina could not have occurred had not a willing political class put out the for sale signs long ago. Peronism, Argentina's peculiar form of nationalist populism from the 1940s and '50s, capitalized on the country's postwar largesse and lulled the populace into accepting political rot in exchange for fairly broad access to a share of the loot. After Menem came to power in 1989, he took a major detour from the Peronist vision. While preserving the rhetoric, the party structures and the patronage, he engineered huge privatizations, dismantled trade barriers and freed financial flows into and especially out of the country. The cornerstone of his monetarist policy, adopted at a time of hyperinflation, was the guarantee that a peso was a dollar was a peso, now and forever.

As a result of Menem's policies, what was once just old-fashioned corruption gave way to bargain-basement sales of the family silver. …