Economic Globalization of Argentina - Essay Example

Economic Globalization of Argentina Jumana Salameh Dr. Marissa Brookes POSC 160 11 March Introduction The economic environment of Argentina changed with the developing globalization that began over the last two decades. Looking into Argentina’s past, the formerly closed economy later opened, allowing its economic integration to the global economy. The structural reforms carried out in Argentina in the 90s set its economy on a path to sustained growth, after the country’s financial difficulties and poor economic performance that resulted to hyperinflation towards the end of the 80’s. Argentina undertook plans that led to financial systems, tax and public sector reforms, capital movement, and trade liberalization along the 90s, which projected the nation’s progress as the globalization model of economic success. Fortunately, despite the Mexican crisis in the mid of the 90’s, Argentina experienced high GDP growth and income level, but its economy could not avoid the increasing inequality and unemployment levels, and later billions of public debt and uncompetitive currency level. Thesis: This document brings out and elaborates the consequences of the economic globalization of Argentina’s finance, trade and labor since the 1990s. It argues that poorly controlled economic integration with the global economy contributed to the financial strain, collapse of fixed exchange rate system, high unemployment, labor market disruption, and weak currency that affected households and domestic activities. Effect of Argentina Financial Turmoil on Employment During the 1990s decade, Argentina was an example of many emerging countries that applied the multiple policies to reform its economy. The set of policies called the Washington consensus and implemented through the IMF and World Bank, changed the exchange rates, foreign direct investment and the financial liberalization of Argentina (WHO who.int). First of all, the IMF cannot escape the role it played in contributing to the 2001 financial crisis in Argentina, after a decade’s involvement in advising and financing Argentine’s economic programs. Second, the Argentine government made serious mistakes in its fiscal policies, which all ended up in high sovereign debt and bankruptcy, after a period of pegging the peso to the US dollar and excessive borrowing. Argentina later entered the debt trap in 2001 with no rescue from the IMF, which affected the jobs in the service and banking sector the most. With the previous economic growth, Argentina had an increasing number of middle class working populations. Despite the persistent increasing unemployment over the decade, the nation experience of job loss was intolerable for the society. The working middle class suffered a loss of their formal employments and majority of both the formal and informal workers had their income reduced, not to mention the high number of Argentines that now lived at an income below the poverty line (“What Argentina” globalization101.org). The banking industry and those who worked in the industry experienced the immediate shock, as the economy declined and increased bankruptcies that saw most financial institutions closed. The banking crisis in Argentina forced many banks out of operation after withdrawal of foreign investors, working argentines and bankruptcy of the bank debtors. According to Saxton, “unemployment, excluding people working in emergency government relief programs, rose from 12.4% in 1998 to 18.3% in 2001 and 23.6% in 2002, while the poverty rate rose from 25.9% in 1998 to 38.3% in 2001 and 57.5% in 2002” (1). The massive job loss and more than half pay cuts of working group salaries meant most people could not be able to meet their daily needs. A good number of the upper and lower middle class in the banking industry lost their jobs, and majority had their incomes substantially reduced. The low skilled workers in the manufacturing industries went unemployed and as the major industries collapsed. For example the Zanon ceramic industry of Argentina like other factories saw approximately 300 jobs lost over one night and reduced wages for workers before it’s shut down in 2001(Gautreau atlismta.org). Wineries, cotton and meat production industries were among those collapsed and contributing to the high unemployment. By 2000, manufacturing employment had fell by 46.6 percent in Argentina, with the currency overvaluation and trade liberalization encouraging the capital over the labor markets (Bayon 133). All together, the newly unemployed workers and increased underemployment initiated other social problems in an already economically destabilized nation. Impacts on Labor Rights The 2001/2002 crisis in Argentina facilitated labor unrest of the society after excessive job layoffs and increased poverty and inequality among the citizens. The upper class and elite group were least affected by the crisis and occupied the high ranking positions in industries and workplaces. On the other hand, the impoverished middle and lower class group suffered the most and made up the uprising movements against the government. Social protests and demonstrations of the factory workers, the unemployed group, students and activists among others matched on the streets after loss of their savings, due to poor policies enforced in the banking institutions. The labor market could not rescue itself after the pressure buildup from high cost of production and low returns in the country. With the trade liberalization and reduced tax charge for the foreign products, imports exceeded Argentines’ export and their local products lost competitiveness. Together with the high demand of skilled labor force, most people were kept out of business, while the employers took advantage of the deteriorating economy to reduce the worker’s wages and enhance their profits. The workers movement sort to abolish the capitalist system endorsed in Argentina that made the upper class wealthier, as the lower social groups sank into poverty during the globalization regime. Instead of the expected benefit of globalization to the low skilled workers, the income level of 10 percent of the richest households rose from 17.8 to 27 times more than 10 percent of the poorest household from 1994 to 2001 (Chrabolowsky 3). It was one of the persistent violations of rights to fair payments that led to impoverished workers protesting on the streets. Menem’s labor reforms evidently failed to protect the minimum wage of the employees from the employers, and successively paved way for work instabilities by limiting protection against workers. Privatization of companies provided an opportunity for reduced labor standards and rights in the capitalist system. The privatization of the social services, downsizing, and deregulation of the public institution failed to benefit the Argentines; instead, their private pension funds reduced drastically and were taxed highly on the consumption and income (Ranis 11). Labor market was made more flexible through different policies under the presidency of Menem and De la rua before the 2001 crisis, which left many workers unprotected and unregistered with limited access to social benefits and unstable labor relations. Impacts on Working Conditions Globalization of Argentina’s economy concurred with the government and policies’ changes that oppressed the consumer power and workers in the labor market. Following the labor flexibilization policies in Argentina during the 90s, it was unfortunate that employment deteriorated while unpredictable and precarious working conditions intensified. Reduced interest rates facilitated high privatization of the public companies; most formerly state owned companies had become foreign companies’ property, and with the adopted policies by the government, employment relation and safety ended up deteriorating. Privatization of companies led to increased disregard of workplace safety and strain on the employees. While the few profits were used for their wages, the largest share was left with the new owners or foreigners with little being done to improve the working conditions of the workers. By the time the crisis began, workers exploitation was apparent and with the limited resources (water, power and machinery), most people had to work for long hours in factories to raise enough capital, but also exposed themselves to health risks through alternative and artisanal ways of production. Before the close down of factories after the crisis and the factories occupation by the workers in Argentina, the workforce whom in this case comprised of the low skilled labor, worked in unhygienic and environments dangerous for their health. Globalization of labor not only made their jobs insecure, but reduced the responsibilities of the employers to ensuring work safety conditions. The workplace Hazard law of 1995 (Ley de Riesgos de Trabajo) worked towards “limiting employers’ liability for workplace accidents and illnesses, which eventually led to increased accidents and employers’ negligence of work safety” (Howarth 12). Such policies actively contributed to obstructing workers’ rights, especially in manufacturing industries and other factories, while allowing employers to escape their costs in safety of workers. For example, before the Zanon factory occupation, the dire working conditions were estimated to cause 30 accidents per month and close to 14 workers deaths over the 90s, demonstrating the jeopardized safety and health care of workers (Gautreau atlismta.org). Conclusion The severe impact of globalization left the labor sector in the economy with limited opportunities as the government concentrated on the capital aspect of rebuilding the nation. In the end, people lacked enough purchasing power to propel their livelihoods and purchase the highly embraced imported goods. Between 2001 to late 2003, President De la Rua was succeeded by Ramon Puerta, Adolfo Rodriguez, and Eduardo Duhalde until finally, Nestor Kirchner was elected and managed to maintain normalcy and restructuring of the country’s debts and labor industry. The employers and owners of the privatized companies may have gained the most during the decade of globalization, but the effect turned sour for everyone (inclusive of employees) with the devaluation of the Argentine peso and freezing of the accounts. However, the workers experienced a deep loss within the crisis period but emerged winners by their social unrests and factory occupations to restore their country into operations. Globalization of trade, finance and labor and reluctant policies by the previous governments had failed to uplift and protect workers employment over the decade. It was the right time that workers cooperatives emerged and together with the unions, they worked to reclaim labor rights for the people, ensured their safety and secured their employment. Works Cited Bayon, M.C. “Social Precarity in Mexico and Argentina: Trends, Manifestations and National Trajectories.” Eclac.cl. April 2006. Web. 12 March 2014. Chrabolowsky L. “Engendering Trade Unions and Social Movements: New Proposals of Social Inclusion in Argentina.” globalcitizen.net. 23 November 2003. Web. 11 March 2014. Gautreau, G. “The Rise of Worker Cooperatives in Argentina: Zanon Ceramics laying out the tiles for Argentine socialism.” atlismta.org. n.d. Web.12 March 2014. Howarth, M. “Worker Co-operatives and the Phenomenon of Empresas Recuperadas in Argentina: An Analysis of Their Potential for Replication.” co-op.ac.uk. 2007. Web. 12 March 2014. Ranis, P. “Rebellion, Class, and Labor in Argentine Society.” Spring 2004. Working USA, 7 (4) Spring 2004: p.8–35. Saxton, J. “Argentina’s Economic Crisis: Causes and Cures.” hacer.org. n.d. Web. 12 March 2014. “What Argentina Thinks About Globalization: An Interview from Buenos Aires.” Globalization101.org. 6 February, 2007. Web. 11 March 2014. WHO. “Washington Consensus.” who.int. n.d. Web. 11 March 2014. Read More