Beyond the diffusion of neoliberalism: Embedded reasoning and policy innovation in the origins of Argentinian currency board

Mariana Heredia,Pablo Nemiña

doi:10.4013/hist.2021.252.05

Abstract

Suffering from high rates of inflation since the 1940’s and having experienced two hyperinflations at the end of the 1980s, Argentina faced in 2019 an increase of prices of more than 50%. But in the 1990s, Argentina achieved at once prices stability and growth. Which were the sources of such an immediate change? Which lessons can be drawn from this experience? As in the 1990s Argentina adopted deep market reforms, stability could be considered an achievement of neoliberal diffusion. Not only international forces were driving forces for the change; the International Monetary Found (IMF) celebrated the success and invited other emerging nations to imitate it. Nevertheless, this perspective underestimates the importance of local context in the history of neoliberal reforms and overestimates the coherence of external forces. Through the analyses of testimonies of Argentine and foreign officials and the study of declassified documents from the IMF, this paper argues that stability was only archived after the adoption of a currency board, which was against the recommendation of most foreign officials. Instead of a simple top-down transposition of ideas, the Argentinian case reveals the importance of technocrats’ agency. Their local innovation not only made the diffusion of neoliberalism possible, it also turned currency board into one of the global anti-inflationist recipes recommended to other countries, despise its heavy consequences.

Highlights

Considered an ineluctable effect of growth in emerging economies in the postwar years, inflation has become an endangered species in the economic landscape
Through the analyses of testimonies of Argentine and foreign officials and the study of declassified documents from the International Monetary Found (IMF), this paper argues that neoliberal reforms gained legitimacy thanks to the fight against inflation, but stability was achieved only after the adoption of a currency board, which was against the recommendation of most foreign officials
While the latter two picked up on the question of the integration of one third of the reserves in sovereign bonds (IMF, 1991c, p. 53, 56), the Canadian director even suggested that it was necessary to design a contingency plan to be put into practice if the currency board turned out to be unsustainable (IMF, 1991c, p. 50). Since it did not satisfy internationally established canons, neither those of a pure Currency Board nor those of the Washington Consensus (WC), and since it did not have the initial support of major foreign and international authorities, convertibility cannot be considered a part of an imported economic orthodoxy. It wasn’t clear whether those who voted for the arrangement at the IMF or locally supported the fixed monetary system believed that it would endure for a decade, or if they viewed it as a short-term solution to economic problems

Summary

Introduction

Considered an ineluctable effect of growth in emerging economies in the postwar years, inflation has become an endangered species in the economic landscape. Since it did not satisfy internationally established canons, neither those of a pure Currency Board nor those of the WC, and since it did not have the initial support of major foreign and international authorities, convertibility cannot be considered a part of an imported economic orthodoxy Once adopted, it wasn’t clear whether those who voted for the arrangement at the IMF or locally supported the fixed monetary system believed that it would endure for a decade, or if they viewed it as a short-term solution to economic problems. Like most heterodox and orthodox groups, Menem’s Economic team worried about the social costs and external vulnerability caused by convertibility[26]

Global alignment and eclecticism for export

Concluding remarks

Findings

Argentinian innovation and its later international