Planning under Pressure
Two weeks after Perón's fall General Lonardi appointed noted Argentine economist Raúl Prebisch head of a committee to survey the nation's economy and make recommendations for its reform. Prebisch's report, submitted a month later, began by warning that Argentina was then undergoing "a crisis of unparalleled gravity." In every previous economic crisis the country's great productive potential remained intact, permitting a quick recovery, but now it had become technologically backward as the result of "a dozen years of misrule" during which capital had been discouraged. Recovery would require an "intense and prolonged" effort, as well as sizable investments. Painful sacrifices in the general living standard would be necessary in order to raise capital for those investments.1
Argentina was suffering from "stagflation": sluggish production coupled with inflation. On the production side, agriculture had been discouraged by price controls and IAPI while industry had suffered from regulation, restrictive labor practices, and the government's failure to invest in heavy industry and infrastructure. Bureaucracy and corruption had discouraged productive efforts and had channeled investment into speculative activities. At the same time, inflation had been caused by an irresponsible expansion of the money supply and by encouraging wages to rise in excess of productivity. There was a growing demand for a shrinking supply of goods.
Such was Prebisch's analysis of the problem; his recommended cure was a long period of austerity, during which the government would have to trim its budget by firing redundant staff and either selling its loss-producing companies or making them pay their way. Taxes and service charges would have to be raised at the same time that credit was restricted. Many public works would have to be canceled; only the most essential could be funded. The practice of subsidizing all import-substituting industries would have to be discarded in favor of concentrating on those that had export potential (or which at least could compete with foreign imports without the