Last updated on June 27, 2011
From an article in n + 1 magazine:
“Argentina entered the new century in straits similar to those of a disquieting number of European counties today. With the peso shackled to the dollar, it had (as Greece, Spain, and the other so-called PIIGS on the periphery of the Eurozone do today) what appeared to be an irremediably overvalued currency sapping the competitiveness of its exports, along with mounting difficulties servicing its debt as tax receipts dwindled in the face of recession. The counsel of the International Monetary Fund (IMF) was naturally for austerity. The Argentines should maintain dollar convertibility—that is, a pricey currency—and trim public expenditure in order to cover interest payments. . . . [Yet] austerity in the face of gigantic indebtedness . . . yielded precisely the devaluation and default it was supposed to prevent. If the Argentine experience is truly as exemplary as the IMF once maintained, the story can’t be a heartening one in light of the turn toward austerity today being undertaken in Europe and threatened in the US.”
I couldn’t find an ungated version of the article, so interested readers may have to spring for the actual issue of n + 1.
I think the comparison is a great one given the similarity between the Argentine riots of 2001 and the Greek riots of 2011: in both cases, some external force — the IMF in the case of Argentina, the European Union in the case of Greece — is imposing austerity measures on a national government, and people respond to the threat of austerity by taking to the streets. This is similar to the way food riots break out in response to the threat of hunger and famine.
Ultimately, I believe this will lead to the end of the Eurozone. The idea of a monetary union is a great one, except for one small detail: cheap talk. Countries can pledge to to respect the Euro convergence criteria in order to join the monetary union, but once they are union members, it becomes very difficult politically to expel them for not respecting said criteria.
In case some readers are interested in knowing more about the political unrest that can take place as a consequence of austerity, the edited volume by Walton and Seddon (1994) on the so-called “IMF riots” of the 1970s, 1980s, and 1990s is a very good place to start. On the Argentinian riots of 2001 specifically, the article by Auyero and Moran (2007) constitutes a great read.