Debt crisis is back – the class struggle and tasks for the Left
Over a decade has passed since the Argentinian financial crash of 2000-2002, which led to one of history’s biggest sovereign defaults. The dominant narrative has it that the ensuing period of economic turmoil and mass struggle was brought to an end by the heroic travails of the Kirchner dynasty. Nestor Kirchner and Cristina Fernandez Kirchner are said to have turned the situation around, leaving the spectre of debt crisis behind as the economy returned to growth. Argentina was a model of how sovereign debt crises can be left behind.
However, 11 years later, world press headlines are again warning of an Argentinian sovereign default. On the very same debt! This forms part of an explosive cocktail of crisis and social turmoil which is pushing the country into a new round of social upheaval.
“Holdout” vulture debtors push government to the brink of default
The spark for the renewal of the debt crisis was a ruling by US Supreme Court which upheld claims by a group of “holdout” creditors (led by US billionaire investor, Paul Singer, a high-profile supporter of George W Bush) for the full repayment of disputed bonds. “Holdout” creditors are those who refused to partake in the debt restructuring schemes which the Kirchners negotiated with 93% of all bondholders following the default. The total value of unpaid debts and interest “owed” to holdout creditors is estimated at $15 billion.
This ruling threw markets into turmoil, provoked by the threat of default, which was even admitted in an emergency televised address by Cristina Fernandez. While responding with fiery rhetoric, refusing to submit to the “extortion” of these “vulture” funds, she also admitted that meeting holdout debtors was “impossible”. The court ruling even opened the way for possible seizure of public assets such as embassy buildings or military ships in the event of a refusal to pay.
The return of the spectre of default to Argentina shows the unviability of capitalist solutions to sovereign debt crises, and carries important lessons for other countries which are being forced down a similar path, under the pressure of the current world crisis. Rather than really resolving the contradictions behind the crisis, these deals and solutions only temporarily paper over the wounds of the system, storing up further, often deeper, explosions of crisis. A consistent solution can only be dreamt of on the basis of breaking with the dictatorship of the markets and capitalism, armed with a socialist alternative.
Government capitulation to vulture creditors and international capitalism
A workers’ government would refuse to accept the court’s ruling, in the name of designating public funds to badly needed massive spending on services and the recuperation of mass living standards, instead of pouring billions more into the pockets of the debt speculators. Such a stand would be immensely popular internationally, not only in Latin America, but also throughout the Troika-ravaged European countries. However, this would only be viable based on a break with capitalism. Beyond its “anti-vulture” rhetoric, the government refuses to do this. In this context, the logic of its position will always be towards deals and compromises, such as that which it is currently discussing with the “holdout vultures”.
This is because default would spell disaster for any government which accepts the rule of the markets. This is especially the case given the Kirchner regime’s campaign to win the favour of international markets, just after the successful conclusion to its talks with the “Paris club”, another band of rogue investors, in which a $10 billion looting of public finances was agreed.
In 2012, the Cristina Fernandez government aroused the interest and sympathy of many workers and youth around the world, after expropriating a majority share in the YPF oil company from Spanish firm Respol, again accompanied by fiery rhetoric. However, this “expropriation” – which in the first place affected only 51% of the company – was only concluded in a deal agreed this year which saw the government fully meeting the demands of international capitalism, delivering a $10 billion bailout to the companies’ former owners.
The government’s argument is that satisfying the vultures’ demands today will lead them to come back and invest tomorrow. In other words, paying the vultures’ loot demands, in order to invite them back to loot some more! However, the current crisis shows that this approach is not sustainable. While the government can temporarily satisfy this or that group of vultures, the vultures’ demands when taken together, are enough to sink the economy.
Considering this approach, it is no great surprise that soon after its fiery words of defiance of the holdout bondholders, instead of confronting the extortion head on with a refusal to pay, the government announced a U-turn, agreeing to meet for negotiations with the debt vultures. However, even on this basis, a technical default on Argentinian debt cannot be ruled out.
Argentinian and Greek debt crises compared
A precedent for foreign debt crises
The capitalist press has spoken of the “precedent” which the victory of holdout creditors could set for future sovereign debt crises. Vulture investors seeking to profit by bringing sovereign states to their knees will be strengthened by the US court’s ruling. The choice facing governments in countries which confront vulture funds in present and future crises will be similar: either break with the vulture markets’ dictatorship with bold socialist measures, nationalising the banks and financial sector, and implementing a state monopoly on foreign trade to protect the economy and living standards, or bend the knee to creditors and repay the debts based on imposing “sacrifices" on the population through austerity.
In Greece for example, the leadership of Syriza has inclined towards the latter course. Against the position of those, such as the comrades of the CWI, who defend a position of a revolutionary break with the Troika and capitalist EU and struggle for an alternative socialist European confederation, big sections of the European left in Greece, Portugal, Ireland, Spain etc, have adopted the failed position of the Latin American reformism of the past. They argue for re-negotiation, or refusal to pay interest rates, rather than non-payment of the debt. They should be asked, how would this re-structuring, in the context of the European crisis, avoid the contradictions and disastrous consequences of that implemented in Argentina?
Economic crisis and inflation wreak havoc on working class
The return of the debt crisis abyss comes amid a general worsening of the economic situation in Argentina, once lauded as a model growth country which had avoided the hammer blows of the world crisis. The slowdown of the “emerging” economies, coupled with a fall in commodity prices has pushed Argentina into recession, falling from 8.9% growth in 2011 to entering recession in teh first quarter of 2014.
Inflation has wreaked havoc on salaries, with wage increases for this year predicted at an average of 27%, compared with up to 40% inflation! This is visiting hardship on millions of working families, bringing back memories of the devastating impact of hyper-inflation, a feature of last decade’s crash. Instead of continuing to bend the knee to imperialism and capitalism, a workers’ government could adopt a series of emergency measures – most importantly, nationalising banks and financial institutions under democratic control to control prices and inflation. This could tackle speculation and protect working class people, salaries and living standards from the ravages of crisis and inflation.
President, Cristina Fernandez Kirchner
Crisis of Kirchnerism
In a way, Argentina’s current economic quagmire is a good expression of the general trends in South America. Key South American economies – which rode on the wave of a commodities boom spurred on by the strength of the Chinese economy – are being dragged into the World crisis, albeit in a delayed fashion.
In a similar way, the crisis of “Kirchnerism” and the current government expresses the general crisis of the political model of populist governments basing themselves on left rhetoric in a number of Latin American countries over the last period. Successive Kirchner governments based their economic policy on high prices for commodities such as soy, allowing for the financing of some limited social reforms. However, at no stage were measures taken which fundamentally challenged the interests of big business or imperialism, such as significant nationalisations or measures to penalise the rich or multi-nationals.
The Kirchners and their supporters see themselves as a continuation of the “Peronist“ tradition, which dominated Argentinian politics at various stages going back to the 1940s. However, despite some similarities, many factors differentiate the current government from the original Peronist model. Peronism was essentially a bourgeois nationalist Bonapartist movement, which in the last analysis defended the capitalist system. However, while never a socialist workers’ movement, Peronism did, at various stages, take measures against the big capitalists, in order to maintain the mass support it enjoyed among the working class, and within the workers’ organizations. It was a peculiar type of “Bonapartist” movement, which balanced between the working class and the bosses, even attracting the support of some on the far right.
The nationalisations and progressive reforms implemented under Juan Peron, which raised living standards significantly, won over the mass of the working class and trade unions. Many of these reforms were unravelled in subsequent decades, including by “Peronist” governments, especially the 10 years of Carlos Menem’s government in the 1990s. However, the far-reaching nature of the initial Peronist reforms led to this mass support remaining intact for decades, with Peronism consolidating itself as a political tradition among the working class.
While Kirchnerism – especially under Nestor Kirchner – maintained a close relationship with the right-wing trade union bureaucracy, its hold over the workers’ movement and has never been of the same character. This is partially due to the far more limited nature of their reforms and concessions to the working class than those of previous Peronist govermnents. The first regime of Juan Peron based itself on a powerful economic growth in the post-war period at a time when Argentina was among the world’s strongest economies. This allowed for more far-reaching reforms to be implemented under capitalism, which Kirchnerism has not been able to provide.
The developing divorce between Kirchnerism and the working class was partially visualised by the formal break of key trade union leaders from the government during Cristina Fernandez’s first term. Particularly significant was the breaking away of Hugo Moyano and Luis Barrionuevo, key leaders of the biggest Trade Union federation, the CGT, and former supporters of the government. Though not genuine fighting union leaders themselves, their break from the government reflected the growing anti-worker profile of Kirchnerism and the moving into struggle of key sections of the working class against it. It also opened the way for the calling of 2 powerful 24 hour general strikes, in November 2012 and April 2014.
Striking teachers take to the streets
Class struggle on the rise – workers push for escalation of action from below
As world-cup fever took hold last week, the government’s cabinet chief, Jorge Capitanich, expressed the hope that “people won’t talk about anything except football”, just before the debt crisis exploded again. This statement reflects the desperation of the government and the ruling class for some “breathing space” following the upturn in struggle which has shaken the country in the last period.
In March, teachers were at the forefront of the struggle against the destruction of salaries before the avalanche of inflation. In the province of Buenos Aires, where 40% of Argentinians live, a record 18-day general strike of teachers spearheaded a national movement of strikes and protests. However, it also reflected an important feature of this new upturn of struggle: the contradiction between the combative mood among key sectors of workers willing to fight and the break of the trade union bureaucracy, in many cases tied to ruling politicians.
Rank and file teachers’ assemblies, in which fighting left organisations from the FIT (Workers’ Left Front – see below) played a key role in many instances, repeatedly defied the conservative leaders. This shows the potential for the organisation of a struggle from below throughout the movement for a militant industrial policy. In this instance, the role of the right-wing leaders in holding back developments proved decisive, as they refused to unite the struggles of teachers and students in different provinces in a united national strike capable of forcing a definitive U-turn from provincial and national governments.
Potential for a mass rank and file movement
However, steps in the right direction have been taken, and not only among teachers. An impressive meeting of militant trade unionists entitled the “Combative Trade Union Encounter” took place in March, and was attended by over 4,000 activists from across the trade union movement. Such rank and file co-ordination – ultimately aimed at transforming the union movement and replacing it with a fighting socialist leadership – can be key to, in the first instance, piling pressure on the existing leaders to force them further than they would like in terms of serious action. Indeed this meeting, by accentuating pressure from below to act by calling a national day of action on 9 April, may have played a certain role in the decision by “oppositionist” union leaders to call a general strike on 10 April.
Many of the forces of the revolutionary left – organised around the FIT -which have won certain, often leading, positions in the unions played a key role in this initiative. There is now the potential to take it beyond individual meetings, and establish a united network of militant activists, united around demands for a more militant policy for the trade union movement as a whole. International examples can be drawn upon, such as the National Shop Stewards’ Network in Britain, which through a united campaign forced the question of a general strike onto the table for even the most conservative of Britain’s union leaders.
10 April general strike – “Sunday strike” vs active strike
The general strike on 10 April achieved a paralysis even greater than that of 20 November 2012. Such was the groundswell of anger that the strike tapped into that despite the fact that the union factions which called it only represent 40% of the movement, a majority of workers throughout the transport, education, and industry sectors came out.
This explosion of anger – visualised by the thousands-strong road blockades which shut down cities around the country – took those who had called the strike by surprise. Oppositionist bureaucrats, Moyano and Barrionuevo, had envisaged the strike as a quiet reminder to leading politicians of their existence, most likely with a view to forging a new alliance with one of 2015’s Presidential hopefuls. On the key political issues of the day, such as the multi-billion dollar sell-outs of the government to t the vulture creditors, these leaders are in line with government policy.
They envisaged a “Sunday stoppage” on the day of the general strike, emphasising the passive nature of the protest. However, thousands of workers had other ideas. Under the leadership of the union and political left, thousands were mobilised under the slogan of an “active strike”, with mass road blockades which accentuated the paralysis, and gave workers an active role in the mobilisations.
This protagonist role of the workers themselves should now be built upon. Democratic workplace and territorial assemblies which could discuss and agree a campaign of mobilisation from below to force a new general stoppage. This could serve as a first step in a sustained plan of action to impose a workers’ alternative to the misery of inflation and looting of the imperialist vulture bondholders. Such a plan would involve a series of general strikes and mas mobilisations. With Hugo Moyano and other leaders discussing the concrete possibility of a new general strike in the next weeks – though they will try to avoid it – such a campaign could have an immediate catalyst effect on kick-starting a new round of national struggle.
Success of the FIT
As well as the split with the trade union movement, the crisis of Kirchnerism has also had a political expression. Divisions in the “Kirchnerist” camp abound, with at least 5 “Peronist” candidates standing for the 2015 Presidential election, including former Ministers and close allies of Kirchner and Fernandez. However, none of these “opposition” candidates represents a left break with the neo-liberal road adopted by Kirchnerism. None of them represents a fundamentally different approach to the question of the debt, YPF expropriation or the protection of salaries against inflation.
However, the crisis of Kirchnerism has also been expressed in important gains for the genuine left. The Workers’ Left Front (FIT), an alliance of left-wing organizations dominated by the Workers’ Party (PO), Party of Socialist Workers (PTS) and Socialist Left (IS), all of whom hail from a Trotskyist tradition won an important electoral victory in last year’s legislative elections. They won 1.2 million votes, 3 national MPs and regional MPs in 7 provinces. Its likely candidate in the 2015 Presidential elections, PO leader, Jorge Altamira, is currently on between 4 and 6% in opinion polls, which would triple its result in the 2011 elections. If this is reflected in parliamentary elections to take place on the same day, the FIT would double its representation.
This extremely encouraging development shows the radicalisation in society and that millions of workers are looking for a coherent left alternative to Kirchnerism in crisis. The FIT’s programme includes the most important aspects of a socialist programme, and sets the horizon of a struggle for a workers’ government. In the midst of the generalised watering down and rightward shift in the programme and discourse of significant left forces from Greece and Portugal to Mexico and Brazil, this comes as a breath of fresh air, and shows that a radical programme of social transformation can gain a mass echo. This is a blow to arguments that watering down programme is necessary to gain the ear of the masses which prevail among the right-wing reformist leaders of the workers’ movement internationally.
How can a new mass working class force be built?
However, the question of how the FIT can develop to facilitate the formation of a mass party of the working class to provide the political leadership necessary to change society, must now be debated throughout the movement. The crisis of Kirchnerism provides an historic opportunity for the growth of a political force based on the working class itself, its movement and interests, a force whose birth has been impeded by the peculiar nature of Peronism in the past. With the correct approach and orientation, the FIT can develop as a force which reflects such a break on a mass level.
However, this depends on how the opportunities are seized. Revolutionary Trotskyist forces can gain a significant position among the masses and win mass support under certain conditions. This is especially the case in countries with a significant Trotskyist tradition among the working class – as is the case in Argentina, where the “MAS” had a significant working class following before fracturing and declining in the 1990s. However, the FIT electoral results reflect the potential that exists not only for the growth of the individual organisations which make it up, but for the development of a mass party of the working class.
There are parallels here with the situation in France at the beginning of the century. In the 2002 Presidential elections, the candidates of the LCR and LO won 10% of the vote between them – almost 3 million votes in total. In the context of the crisis of the former social democratic PS, which failed to even get to the second round, this opened up the possibility of a new mass force being built, linked to the struggles of the working class. At the time, the CWI argued for the launching of a new broader political force on the left, organized on a federal basis with the right of all groups and tendencies to exist and campaign independently, armed with a socialist programme.
Such a force would have allowed broader layers of workers and youth to come together around a new party, and present the revolutionary left as a viable force capable of disputing the hegemony of the establishment parties. However, the LCR and LO failed to embrace such a perspective, with each force retreating into its own corner. The subsequent decline of both organizations and dramatic stagnation and decline of the NPA, is testament to the consequences that such mistakes can bring.
A similar opportunity, to use electoral success as the springboard for the development of a new mass workers’ force, exists in Argentina. However, as the French experience shows, it will not continue to exist forever.
The need for, and success of, the FIT ultimately reflects that none of the individual component parts of the alliance has developed in a sufficient way as to be capable of channelling such a mass break with Peronism through the growth of its own ranks. This poses the question of the need for a broader vehicle.
Revolutionaries struggle for mass revolutionary parties to lead the struggle for socialist change. However, this struggle can sometimes pass through a period of organized revolutionary intervention into a broader working class formation which, in its initial stages, is not of a fully rounded-out revolutionary socialist character. At times, this requires revolutionary forces to play a role in establishing broader political organizations of the working class which encompass revolutionary forces and those who are in transition from a reformist position, such as those now breaking from Peronism. This entails fighting alongside layers of workers and leaders who entertain illusions in a reformist solution to the crisis of capitalism. Patiently explaining the limits of this approach, and exposing its limitations against the hammer blows of events can be key to winning the support of the majority in the working class.
A perspective which sees the development of a mass revolutionary force as the result of a linear process of the growth of a small revolutionary organization, without taking into account the twists and turns thrown up by the class struggle can fail to prepare a revolutionary organization for the tasks of the next period. Such an approach could be key to winning mass support for a revolutionary perspective of socialist change, based on democratic public ownership and a workers’ government, linked to the struggle for a socialist federation of Latin America as part of a socialist world, as the only viable solution to the current crisis.
In Argentina, a call for the formation of a new broad political movement of the working class could play a key role in the development of a mass socialist alternative to Kirchnerism and Peronism. Such a movement would have to be organised on a federal basis with the right of different organizations and tendencies to operate freely within it. The FIT’s electoral success places it in an opportune position to spearhead such a call, linked to the struggles of workers on the ground, in the streets, workplaces and trade union movement.
The role of the FIT’s component organizations has, so far, been fundamental to its success. The CWI has differences with the main forces involved on important international issues of analysis and programme. However, serious revolutionary activists have a duty to examine what level of agreement can be reached with other forces, on a solid basis of profound discussion on programme, practice and method. The development of the FIT and role of its component parts can have a decisive influence on developments in Argentina in the coming period, and must thus be openly and honestly discussed with a view to future agreement. If conducted correctly, the opening up of such a dialogue on a world scale could offer exciting prospects for the world socialist movement.