Argentina and the U.S. Leninists

Why does the United States apparently favor a Leninist approach to the Argentinian financial crisis?

January 10, 2002

Why does the United States apparently favor a Leninist approach to the Argentinian financial crisis?

When change is necessary, there are generally two schools of thought. One school believes that gradual, controlled reform is best, while the other insists that a fast and immediate shock works best.

The most famous example of this debate occurred during the early 20th century, when mainstream socialists and social democrats faced off against the followers of the Russian revolutionary Vladimir Ilyich Lenin.

All of them agreed on the goal of giving workers power at the expense of the wealthy classes. But Lenin insisted that this goal could only be obtained by a sudden, violent revolution.

Lenin’s Communist dream came true in Russia — but for Russians, it turned out to be a nightmare. Over the course of time, history has shown that the Leninist approach creates scores of unanticipated, devastating problems. And when it is combined with violence, the damage to a society can be very great indeed.

The strange thing in today’s world is that the current Leninists are the advisors to the President of the United States. George W. Bush’s chief economic advisor Larry Lindsey expressed his views on the subject clearly a few years ago at a Congressional hearing about the U.S.-led bailout of Mexico during its financial crisis in 1994-95.

Asked about the appropriateness of such interventions, he said, “All too often, the IMF simply strengthens existing power elites. It buys them time.” The meaning was plain. Amidst an economic crisis, Mr. Lindsey apparently wants to see the heads of the existing power elites roll. Just like V.I. Lenin.
Laying down the law

More recently, Treasury Secretary Paul O’Neill characterized rescue operations organized by the International Monetary Fund on behalf of the troubled countries in this manner: “When things really crater, the IMF rides in on its horse and throws money at everybody and the private sector people get to take their money out, and everything’s okay again.”

At another time, Mr. O’Neill stated that “We’re not going to be there when the chickens come home to roost” if a country does not follow appropriate economic policies.

Left unstated in all these trigger-happy pronouncements is exactly how the situation would play out if the IMF does not come riding in to a country’s rescue.

Recent events indicate that the process is a little more violent than roosting chickens — and that the results of that revolution are the opposite of what the U.S. Leninists would have hoped for.

On December 5, the IMF’s board delayed a disbursement to Argentina, just the sort of action that many in the Bush Administration wanted. Of course, Argentina is a difficult case, and there are strong arguments for the IMF’s actions.

But the key point is that the pressure on Argentina’s government became unbearable — just the sort of result Mr. Lindsey and the administration’s Leninists would like to see in more countries suffering financial meltdowns.

The shortcomings of this approach have now become evident in Argentina. It is not just the violence and chaos that has overtaken the country.

To the apparent consternation of the U.S. Leninists, the new government will surely be less — not more — willing to adopt U.S.-style economic reforms. But is that really so surprising?

After all, people in Argentina want fast relief for their problems — not lectures, however true, about how long-run faith in markets will bring them wealth. That need for immediate relief was what Lenin himself banked on — and what Larry Lindsey and the administration’s other Leninists, should have realized would trump Washington’s ideological purity.

So, what sounds like tough-love on the part of the U.S. administration really is a cop-out. Being essentially silent allows the opponents of global integration to define the present causes and reasons of failure in Argentina.

From the administration’s perspective, it would probably have been wiser to heed the words of another famous follower of Lenin — the Chinese leader Mao Tse Tung. “Revolution is not a dinner party,” Mao famously wrote, in response to criticisms of the violence and anarchy unleashed in the wake of the communist takeover of China.

Argentina demonstrates this quite clearly. Like any revolution, the fallout from leaving a country in the lurch when it has a financial crisis is apt to be ugly.

Nobody disputes that fact that many of the countries that are faced with a grave economic crisis must attack their own economic problems.

The ultimate root causes of economic crisis are often too much (or inappropriate) state intervention in the economy, coupled with unsustainable government budgets and monetary policies.

And it is true that real reforms are difficult to accomplish because established financial and economic systems benefit those in power. That is what led the Leninist faction within the administration to claim that the only way forward was to force a revolution on the crisis country.

Fortunately, the Leninists are not in complete control U.S. economic policy toward the rest of the world. Within Washington there are powers lined up against Messrs. Lindsey and O’Neill’s views. Colin Powell, the Secretary of State, has surely noted the potential harm Mr. Lindsey’s “throw them to the wolves” approach might do to important allies.

The Defense Department, more powerful now than ever, must be getting nervous over the possibility of yet another front of anti-American emotions and activity opening up in Latin America.

It is very possible that the bloody-minded policy towards Argentina only occurred because Secretaries Powell and Rumsfeld were distracted by the war against terrorists. If so, the Argentine riots should get their attention, fast.