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Latin America’s New Solidarity Economy:
Argentina’s Crisis

by Betsy Bowman and Bob Stone


As legend goes, the Phoenix bird, consumed in flames, rose from its own ashes to fly away stronger than ever.  We’ve spent three weeks in Buenos Aires studying Argentina’s recent version of this legend.  In December 2001, the Argentine people themselves, exercising their own economic power, leaped onto history’s stage to enact a creative scenario only rarely performed under capitalism and never beyond its second act.  As prosperity has returned to Argentina, this ongoing performance has become a side show  --  a very loud one  --  but first-world nations will ignore it at their peril.  For what happens when neo-liberal globalization, invented in the boardrooms and in Washington, hits home in a global economic crisis that will dwarf 1929?  By improvising on a scenario that is still poorly understood, Argentina may have already pioneered a way out of that  crisis.  This is the first in a series on the upsurge of democratic, economically viable alternatives to capitalism in Argentina, Brazil and Venezuela. Our next article will treat the current status of Argentina’s solution to its crisis.  

Argentina was neo-liberalism’s “poster boy.” In 1991, after dictators had run up a huge debt, Argentina obediently imposed the usual IMF/World Bank “structural adjustment.”  Up to the mid-1990s it seemed to prosper by obeying “Washington consensus” imperatives designed to help transnationals:  lower tarrifs, privatize public goods, raise interest rates.  Argentina’s market was thereby opened to international competition, supposedly bringing lower prices and higher quality. In her case, however, it brought one of the swiftest implosions of a country’s economy the world has seen.  December 2001 saw devaluation of Argentina’s peso, previously pegged 1-to-1 to the US dollar, to a third of its former value.  Overnight the purchasing power of all savings dropped by two thirds.  The middle class was wiped out.  But instead of turning on each other, or rallying behind a new Peron who would again co-opt them for conservative ends, ordinary Argentines have at least set an example of true collective autonomy, economic creativity and citizenly solidarity.  

Holding the 1-to-1 exchange rate throughout the 1990s had overvalued Argentina’s exports for buyers on the world market and made its imports relatively cheap. Thus invited to compete, transnationals vigorously accepted.  Large national industries lost business and many small ones folded due either to competition or to high interest rates. From 1997 to December 2001 a process began of borrowing from government, banks, and finally from employees. With mounting debts and interest rates, and declining cash flow, owners could foresee a point at which bankruptcy was inevitable. They first stopped paying retirement, then health, then wages, until workers had no bus fare to work. Unemployment rose to 25% as state employees lost jobs;  production was reduced;  crisis set in.

Instead of looking after their workforces, the wealthy secretly readied bank accounts for massive capital flight. At the most propitious moment shop doors were locked and machines sold.   When bankruptcy inspectors arrived, they found only debt on the books and few assets to sell.  Sympathtic and sometimes corrupt judges granted shelter from creditors, including workers, and validated the throwing of entire workforces out of work.  Big capital simply fled.  For a few nights in mid-December heavily guarded convoys of Brinks trucks literally took the country’s money to the port for transfer to off-shore tax havens. This flight effected, banks closed to prevent a further run by the middle class. Meanwhile, President De la Rua’s economics minister announced even greater spending cuts that would further deepen unemployment:  it was too much.[1] 

On the night of December 19-20, after thousands could not withdraw savings, capitalinos (residents of Buenos Aires) took to the streets to bang pots and pans.  There were massive marches on Congress and the presidential palace.  The police shot 31, shocking the nation.  De la Rúa resigned on December 21.  It was a sharp reminder of the brutality to which Argentina’s ruling class could descend.  This is the same elite whose military during the dictatorship of 1976-1983 had “disappeared” 30,000 mostly intellectuals and labor leaders (i.e. tortured and killed them without trace, by dropping their bodies into the sea from planes).  This paroxysm of selfishness displayed by Argentina’s owners and investors and defended by police and courts, demonstrated the level of Argentine capitalists’ loyalty to their workers who had generated their wealth and to the nation that had protected it.

The steady degeneration of enterprises had not gone unnoticed by workers.  Having been asked to patiently bear lowered wages, only to witness the wealthy saving themselves first, the people were angry.  Consider the grammar of that last phrase.  Its subject is neither a collection of self-interested atoms nor a super-organism with a head running things from the top.  Even before December 2001 the Phoenix scenario had been practiced in several enterprises.  Perhaps nowhere else in the two years following that fateful December was the struggle between new economic forms and neo-liberal globalization so directly engaged.

A bailout was expected. A 50% peso devaluation in March 2002 slashed savings and living standards.  The economy was screaming.  When will the bailout come?  There was none.  As distinct from the $40 billion bailout of Mexico in 1995, and the $70 billion bailout of the Asian crisis in 1997, the United States did not organize a bailout among the world’s bankers.  Why?  José Luis Coraggio, a specialist in popular economics and the rector of General Sarmiento National University in Buenos Aires, angrily explained in mid-2002: "The leadership in Washington that dominates IMF policy is responsible for this economic catastrophe. We are to be made an example of because Argentina has no strategic importance, no major oil reserves, no illegal drugs, and we do not flood the U.S. with immigrants. Our political class bankrupted the country in the 1990s by implementing Washington’s neoliberal economic prescriptions. Now we are told that the only solution is to turn over the bits and pieces that remain of our national economy to foreign lenders and to slash government social spending even further to get ‘rescue financing’ from the IMF."[2]

The Argentine political class and economic elite, and their American and international banker friends  --  despite having professed concern and commitment  --  had all betrayed the Argentine people. So what does a country do when it suddenly has no money and no leaders it can trust?

Abandoned, the Argentine people had only themselves.  But that, it turns out, was enough. For they had the basics:  resources, factories and machines, land, and above all, willing labor.  Alone, but now collectively, Argentines set to work.  Following are the chief forms of social and solidarity economy that they proceeded to create in 2002 and 2003 without money:

----The pot-banging protest was turned into a permanent, directed civic movement known as the “self-convened neighborhood assemblies.”  They spread over the country with 60 to 80 in the capital  --  a lose network often linked through websites.[3]  The assemblies debated and organized solutions.

----In what was Latin America’s most prosperous republic, 50% of Argentinians fell below the poverty line in 2002,[4] and an estimated 8 of the nation’s 37 million people did not eat every day.  So a massive movement of community gardens called huertas, sprang up in public parks, school yards and open spaces.  Often linked to public restaurants or comedores by bonds of solidarity, around 45,000 huertas fed over 2.5 million people into 2003.[5]

----To circulate the necessities of life without money some 5000 local barter networks were created under the Solidarity Barter Network (RTS) and Ecovale, allowing millions to avoid destitution.  Independent of the peso, swap shops, barter, and other forms of social money flourished.[6] 

----Entrepreneurship having died for want of effective demand and credit, associations offering microcredit came forward, filling the void with micro-savings.[7]

----Perhaps most important of all, workers seized scores of factories across the country:  17 in Buenos Aires province and 3 in the capital itself by mid-2002, a movement that reached over 200 “recuperated” enterprises at its peak.[8]   IMPA, for 4 years a self-managed co-op making aluminum wrapping, opened its space to a cultural center and barter club.[9] 

         In sum, Caraggio said:  “Activists long committed to the co-op movement as part of a dynamic of modifying society, have suddenly found fertile terrain in which to launch their projects.”

At first the anger of the people was directed principally at the political class as a whole.  The middle class, having been financially ruined, rallied around the slogan “que se vayan todos”  --  “throw out all the politicians.” The unemployed, called “cartoneros” or recyclers of cardboard, had long challenged privileges of the nation’s capitalists.  But something new is now afoot.  The recuperated enterprises are the only part of the solidarity economy that survives in full health in early 2006.  The cartoneros doubts about the structure of capitalism have now also penetrated these owner-workers due to their radicalizing struggle to keep their self-managed workplaces. They had started out unpolitical, just trying to protect their jobs.  But, having run their enterprises successfully against capitalist opposition and government ambivalence, many now join in questioning the system as such. 

We will devote our next article to the status of the struggle of the recuperated firms in 2006 and its prospects for helping deal with the crisis that is staring us in the face.






[1]          “The Unstable Economy in Argentina,” Sohan Sharma & Surinder Kumar, Z Magazine, January 2003.

[2]          “’Throw them All Out’ Argentina’s Grassroots Rebellion,” Roger Burbach, NACLA Report on the Americas, Vol. 36, No. 1, July-August 2002.

[3]          “New Forms of Grassroots Organization,” Jeremy Brecher, May 2002.

[4]          “Why Argentina Crashed and Is Still Crashing,” Eric Hershberg, NACLA Report on the Americas, Vol. 36, No. 1, July/August 2002 

[5]          Sharma & Kumar, Op. Cit. 

[6]          “Un Avenir en Solidaire,” Philippe Jacquot, Politis, 3 October 2002, (Paris); special issue on the social and solidarity economy.

[7]          Ibid.

[8]          Sharma & Kumar, Op. Cit. 

[9]          Philippe Jacquot, Op.Cit.

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