Don’t Cry For Me, America: Comparing Argentina And The United States

Por Alejandro A. Chafuén. Publicado el 15/5/13 en http://www.forbes.com/sites/alejandrochafuen/2013/05/15/dont-cry-for-me-america-comparing-argentina-and-the-united-states/

Many observers have pondered if the United States is following the same troubled path as Argentina.  In the 1940s, Argentina’s Juan Domingo Perón used government agencies for political gain and created a popular form of fascism called Perónism. In the United States, the recent revelation of the Internal Revenue Service targeting political enemies is a bad omen. Are we on an Argentinean course?

The road to decay in my native country, Argentina, began with the implementation of one of the most powerful collectivist doctrines of the 20th century: fascism. The Labour Charter of 1927 –  promulgated by Italy’s Grand Council of Fascism under Mussolini – is a guiding document of this doctrine and provides for government-based economic management. This same document recommends government provision of healthcare and unemployment insurance. Sound familiar?

Since adopting its own brand of fascism, “Justicialismo,” Argentina began to fall in world economic rankings.

  • In 1930, Argentina’s gold reserves ranked 6th. After the “experts” took over the central bank, reserves fell to 9th in 1948 (with $700 million), 16th during 1950-54 (with $530 million), and 28th during 1960-1964 (with $290 million).
  • The Argentine central bank, created in 1935, was at first a private corporation. Its president lasted longer (seven years) than the president of the country, and it had strict limits for government debt purchases and even had foreign bankers on its board. It became a government entity in 1946.

When Perón assumed power shortly thereafter, he hastily expanded the role of government, relaxed central banking rules and used the bank to facilitate his statist policies. In just 10 years, the peso went from 4.05 per U.S. dollar to 18 in 1955 (and later peaked at 36 that same year). After Perón’s rule, Argentina further devalued its currency to 400 pesos per U.S. dollar by 1970.

Bipartisanship in bad policy-making can be especially damaging. Just as some of President Obama’s interventionist monetary policies were preceded by similar Bush administration policies, some of Perón’s policies were similarly foreshadowed: “Already before we reached power, we started to reform, with the approval and collaboration of the previous de facto regime,” said the populist.

Perón was removed from power in 1955 but his policies lived on.  The “Liberating Revolution” claimed it was leading an effort to return to the free-market system dictated by the Argentine Constitution of 1853.  But Argentines chose an interventionist, Raúl Prebisch, as minister.

Inflationary policies and political use of the monetary regulatory authority, especially after Perón’s first presidency, devastated the economic culture and rule of law of Argentina. In the United States, the Fed does not have all the powers delineated by Perón, and has not caused as much destruction as the Argentine central bank, but the process has been similar and more gradual. The U.S. dollar buys less than 10 percent of what it did in 1913 when the Federal Reserve was created, the debt limit increases regularly—thus stimulating further debt monetization—and monetary authorities have increased their arbitrary interventions.

Under Perón, government agencies gradually got involved in all areas of the economy.  We see a similar pattern in the United States–many sectors of the economy now depend on control, encouragement, or direct management. Obamacare is the best example; it is Perónism or corporatism on steroids.

There are similarities beyond the economic realm. Unlike other populist leaders, such as Hitler and Mussolini, Perón did not have belligerent imperialist ambitions. The same can be said about President Obama.  His conservative critics argue that he wants to reduce U.S. influence around the world.  Moreover, Perón shunned the Argentine founding fathers who favored the free society. Likewise, President Obama is not prone to quoting Madison, Washington, or Jefferson.

But some major differences between cultures still exist, such as the “cult of the leader,” attacking mediating institutions (e.g., Catholic associations and the press), and appealing to the left as well as the right.  Regarding the latter, Peron achieved vast influence over most of the three main components of fascism: labor unions, business corporations, and government. It’s not likely that a U.S. leader will gain control of all three of these in the near future.  During the beginning of the Obama administration it looked as though much of the business world was on board, but if there was ever a honeymoon, it didn’t last long. The Chamber of Commerce, for example, voiced its opposition during the middle of Obama’s first term, and continues to voice its criticism on several fronts.

Other differences, so far, are:

  • The use of government funds for partisan efforts in Argentina is much worse than in the United States.
  • The U.S. government is reluctant to directly attack capitalism.  Interventions are positioned as “going against capitalism to save capitalism.”
  • In the United States, there is greater understanding of the dangers of protectionist and nationalist economic policies.
  •  There is stronger support for the rule of law in the United States. The control of the judiciary by the Argentine government is reaching tyrannical levels.

A major source of hope in the United States is the strength and variety in governments among the 50 states and the richness of our civil society. Economic power is more diffused in the United Statesand some of it, as I noted in a recent column, is moving south to more conservative states. State spending and regulation has grown, but the federal government does not yet have the power to make the states follow all of its dictates and whims.

Pessimists may argue that the stage is set for an ambitious U.S. president, like it was for Perón, to make the majority of the economy dependent on government.  From the year before Perón assumed power and to the end of his rule (1945-1955), total spending by the central government averaged 11% of GNP; this compares with 24% in the United States today. Argentine conservatives created regulatory agencies thinking they would be used for the common good.  Likewise, U.S. conservatives have expanded government and regulations. The regulatory state is much larger today in the United States than in old Perónist Argentina. As with government spending, it can be used to control, encourage, or discourage business. Employed by both countries, excessive regulation is a more secretive means of picking winners and losers, which creates more opportunity for corruption. Perón understood that government spending and regulation could be used as tools of power to reward friends and punish enemies. He did it, and he ruined the Argentine dream.

What we’re seeing in many of today’s U.S. agencies, including the politicization of the IRS, demonstrates that the United States is not immune to the Argentine disease.  Indeed, if we fail to preserve the institutions of the republic, the American dream will be in grave danger.

Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE.

Social Justice And Pope Francis: Choosing Freedom Over Serfdom

Por Alejandro A. Chafuén. Publicado el 20/3/13 en http://www.forbes.com/sites/alejandrochafuen/2013/03/20/social-justice-and-pope-francis-choosing-freedom-over-serfdom/

 Having spent most of his life in Buenos Aires, Pope Francis has given proof that he can rise above his environment. As his compatriot Bishop Alberto Bochatey remarked, “he is a man of few words.” I lived half of my life in Buenos Aires. Few things are more difficult there than finding leaders with his humble demeanor and his preference for teaching by example. Most in his native Argentina have been captured by a political and economic environment ruled by a government dominated “social justice” mentality. Hopefully, Pope Francis will also rise above his culture and help recover a different type of social justice, which was nurtured and developed by members of his religious order.

From the moment that the term “social justice” became a mandatory term in the lingo of Argentine politicians, the country went down the hill. This was during the mid-1940s, when Col. Juan Domingo Perón created the “Justicialista” or the “Justice” party. Perón, an admirer of Benito Mussolini, was following his recommendation: in each country where it would be adopted, fascism will need a new name. The Latin word “fasces,” came from one of the symbols used by Romans to refer to justice. Perón made social “justice” a key pillar of his policies.

The term, however, was not created then. Nobel Laureate F.A. Hayek was correct in pointing out that the term became widely used after a noted Jesuit, Luigi Taparelli d’Azeglio (1793-1862), used it in what was the most important Natural Law treatise during the 19th century in the Latin language world.

Taparelli’s book was translated into Spanish and French, but never into English. Perhaps that explains why Hayek made a mistake by implying that Taparelli used the term in the same corrupted, but popular, interpretation that sees social justice as “taking from the rich and giving to the poor.” As Thomas Patrick Burke has noted in a recent article and book, Taparelli belonged to a rich tradition where social justice has little or nothing to do with redistribution by government. It has more to do with order in society and with the justice that goes beyond courtroom justice.

Even his opposing intellectual giants, like Father Antonio Rosmini Serbati (1797-1855), had similar views on this topic. Rosmini’s daring views were condemned for some time. His cause for beatification was started by John Paul II, and he was the first person beatified by Pope Benedict. Rosmini wrote “The Constitution Under Social Justice.” Published recently by the Acton Institute, it carries an outstanding introduction by the translator Alberto Mingardi. Mingardi, founder of the Bruno Leoni Institute, wrote that “Rosmini openly criticized redistributive policies, which limit and seize private property in the name of compulsory benevolence.”

During the period that goes from Aristotle to Adam Smith, there is an abundance of moral philosophers and jurists who have focused on distributive justice. It is almost impossible to find one who equates it with “Peronist social justice.” Wages, profits, and rents were always parts of commutative justice, or contract law. Distributive justice dealt with taxation, rewards, and honors. Even those who had a warm heart for the poor, such as the Jesuit Juan de Mariana (1536-1624), argued that equality before the law required some inequality, as it was just that the most productive should earn more. Mariana was a scholar and his copious writings made him into a one-man think tank. His works were known to Thomas Jefferson and James Madison. A small but effective think tank analyzing and promoting free enterprise, now carries his name in Spain, the Instituto Juan de Mariana.

Unfortunately it is not only Hayek, but even current outstanding intellectuals, and even Jesuits, who seldom mention this tradition. The approach to social justice of other noted Jesuit intellectuals who had great influence on Church doctrine are also different from today’s redistributive interpretation. Mateo Liberatore (1810-’92), a great champion of private property, played an important role if the drafting of the first great Social Encyclical, Rerum Novarum (1891), he reminded readers that: “in this topic of rights we must diligently guard against giving too much authority (potestà) to the state.”

Another Jesuit, Oswald Nell-Breuning (1890-1991), who played a role similar to Liberatore in the drafting of Quadragesimo Anno (1931), is sometimes accused of sharing a corporatist view of society. Nevertheless, he wrote that it is against social justice to fix salaries that are above the level that make business viable. When was the last time a reader of this column heard a priest or pastor from the pulpit arguing that high workers’ salaries can go against social justice?

I do not know if Pope Francis has studied or pondered the work of the above and other outstanding Jesuit intellectuals. Jesuits writing in recent decades have also presented economic views which have little to do with a Peronist interpretation of social justice. The recently departed James Sadowksy, SJ, of Fordham University, made important contributions to economics and opened the eyes of many libertarian thinkers to Natural Law. Chief among those influenced was the late Murray Rothbard, a co-founder of the Cato Institute and later of the Mises Institute. The recently retired James V. Schall, SJ, of Georgetown University, has also made major contributions. His, “Religion, Wealth, and Poverty,” published several decades ago by The Fraser Institute in Canada, is a classic among those who are inspired by religion and economic liberties.

Social justice is and will continue to be part of Catholic doctrine. The issue is addressed, among other places, in points 410-414 of the Compendium of the Catechism of the Catholic Church. Society ensures social justice when it respects the dignity and the rights of the person as the proper end of society itself. The role of government and civil society is to provide the “conditions that allow associations and individuals what is their due.” It recognizes that some inequalities are not unjust and “enter into the plan of God, but there are also inequalities that result from sin, and structures and institutions which increase perverse incentives.” According to the doctrine, solidarity is manifested in first place by a just distribution of goods, fair remuneration for work, and a zeal for a more just social order. Solidarity does not rule out opposition to government policies. Karol Wojtyla, before becoming Pope John Paul II, wrote that opposing public education can be an act of solidarity.

Given the popularity of the term, and its dangerous appearance in U.S. economic and academic debates, champions of freedom, intellectual entrepreneurs, and scholars should focus more on social justice. The Philadelphia Society, which is celebrating its 50th anniversary this year, will devote its annual meeting in early April to study this topic. This society has tried to stay above the many divisions in the conservative libertarian movement. It was a place where libertarian economist Milton Friedman, conservative icon Russell Kirk, and in-between “fusionist” Frank Meyer, could share a panel and influence the program. It still is. Followers and new scholars from those same conservative libertarian traditions will be part of the discussions. A good example is Professor John Tomasi, the founding director of Brown University Political Theory Project. Tomasi devoted a chapter of his book “Free Market Fairness” to social justice, with the provocative title: “Social Justicitis.”

The late William H. Hutt, an economist with impeccable free-market credentials, wrote that “however woolly the notion is in the mind of the majority who use it, [social justice] can have meaning when one considers the world as it is … in fact, Hayek himself enunciates, very briefly, what we regard and describe as “the true principle of social justice,” a concept which if it were understood could be universally accepted as such.” Pope Francis has a chance to renew the old tradition of social justice and, in this way, move the focus from redistribution to the building of an orderly framework of society that is effective in lifting the poor. Respecting private property, promoting sound money, combating corruption, weeding out crony capitalism, protectionism, and other causes of unjust inequalities, which especially affect the poor, is a path to a truly liberated and more just society.

Alejandro A. Chafuén es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Es  graduado de ESEADE.