When the centre cannot hold

For decades, politics in democratic countries was dominated by parties one could regard as “centrist,” with the leaders of those deriving from left-wing movements insisting they no longer believed in the full-blooded socialist nostrums of former times and their supposedly right-wing rivals stressing they were egalitarians at heart who were determined to “level up” society to ensure that poor people got square deal. Though observers of the political scene continued to use the old geometrical terminology that came into fashion soon after the French Revolution of 1789, whatever differences there were between “left” and “right” became increasingly hard to detect as all big parties did their best to attract “floating voters” by adopting what their strategists assumed to be middle-ofthe-road policies. Theorists called this “triangulation.”

But then the resulting consensus, which underpinned the policies followed by Bill Clinton and Tony Blair, fell apart. In France, the United States, the United Kingdom and other countries, more and more people came to the conclusion that for them it wasn’t working. While the French simply did away with the old parties, replacing them with Marine Le Pen’s National Front – which now calls itself the National Rally – and President Emmanuel Macron’s La République En Marche. North Americans split between Donald Trump, a rambunctious long-time Democrat who took over the Republican Party, and a much-changed Democrat Party heavily influenced by “progressives” obsessed with racial and sexual identities. In the United Kingdom, Boris Johnson’s Conservatives are well on the way to making theirs the party of a working class which is understandably fed up with getting sneered at by comfortably-off lefties ensconced in academe and large sections of the media. It is a modern version of Benjamin Disraeli’s “One-nation Toryism.”

Much the same thing has been happening in Chile where, to widespread surprise, the apparently successful hegemony of by and large centrist parties came to a sudden end in October 2019 when millions of people, evidently unimpressed by their country’s rapid transformation into Latin America’s most dynamic economic and, if the available statistics mean anything, social performer, took to the streets to protest against the status quo. At first, it seemed as though Chile was about to veer hard to the traditional left, but in Sunday’s election, José Antonio Kast – an unapologetic fan of the military dictator Augusto Pinochet – came first and, according to local analysts, has a good chance of winning the run-off in December against the decidedly left-wing Gabriel Boric.

As for Argentina, the signs are that, as has been the case for a great many years, she could once again be bucking the international trend. The main opposition coalition is notably moderate by international standards and so too are the many Peronists who are beginning to turn against Cristina Fernández de Kirchner, if only because they feel she has lost her ability to supply them with the votes they need to stay in business.

However, even if someone like Horacio Rodríguez Larreta does get elected president in 2023 and Peronist pragmatists do manage to rid themselves of the Kirchnerite militants who are excessively fond of the dictatorships ruling Venezuela, Cuba and Nicaragua, this does not mean that Argentina’s “moderates” will be home and dry. The problems facing the country are so appallingly serious that a repeat of the “gradualist” approach Mauricio Macri thought he had to take would be almost certain to fail dismally; as in other parts of the world, this would open the door for politicians willing to take steps that not that long ago would have been considered impossibly extreme. On both ends of the ideological spectrum there are people, such as the fire-breathing libertarian Javier Milei and a gaggle of equally fierce Trotskyites, who say they would be more than willing to do just that.

The old “moderate” consensus was based on the conviction that a judicious synthesis of welfare statism and free-enterprise capitalism would eventually benefit everyone apart from a tiny handful of selfdestructive individuals. This proved to be an illusion. Headlong technological progress greatly benefitted a minority but made life more difficult for most of the rest by depriving them of what had been well-remunerated jobs in factories or offices. As a result, throughout the world, many millions of young people who had expected a university education to provide them with useful credentials have found themselves in limbo. Even harder hit have been members of what was once called the proletariat; large numbers have been abandoned to their fate. Telling them to study computation or move somewhere else where jobs are more plentiful is anything but helpful.

Trump got to where he is because, unlike his country’s “progressives,” he took proper note of the despair sweeping huge tracts of the US as manufacturing jobs got exported to China and a growing influx of immigrants, many of them illegal, from underdeveloped countries brought down wages for unskilled or semiskilled workers, He also realised that bashing patriotism, as so many leading lights of the cultural elite enjoy doing, greatly offended those for whom flag-waving national pride was an essential part of their identity, hence his trademark slogan: “Make America Great Again.”

Even if someone like Horacio Rodríguez Larreta gets elected president in 2023 and Peronist pragmatists manage to rid themselves of Kirchnerite militants, this does not mean that Argentina’s “moderates” will be home and dry.

In Europe, hardly anyone has a good word to say about “the Donald” but this does not mean that all are against nationalism or are willing to allow technological progress plus globalism to deprive them of what they consider to be their birthright. On the contrary, in most countries nationalism is an increasingly powerful force, which is bad news for would-be immigrants from Africa and the Middle East, as is the reaction against economic trends, or measures justified by allusions to climate change and even the Covid pandemic, that harm much of the population.

The old order is in deep trouble. In its way, it has been far too successful, having made possible the creation of once unimaginable wealth and a series of scientific and technological revolutions, but it has also raised expectations so much that few are able to reach what they think are reasonable goals. Unless democratic politicians, whether left-of-centre or slightly to the right, come up with persuasive answers to the questions being raised by the many who suspect that their own future is likely to be far grimmer than the one that, until quite recently, they had taken for granted, they will be shouldered aside by others who have little time for moderation.

With the election behind us, time for a deal with the IMF is running out. Argentina must make an interest payment in December and faces a tough payment calendar in the first quarter of 2022 that it is unable to face.

The general consensus seems to suggest the Fernández-fernández administration is on track to sealing a deal with the International Monetary Fund while the opposition, currently led by Buenos Aires City Mayor Horacio Rodríguez Larreta, will clinch a victory in next year’s presidential elections. This line of thought was already brewing ahead of the PASO primaries that acted as a sort of exhaust valve for the collective Argentine psyche, deflating the “actual” electoral campaign that confirmed the opposition’s victory, despite a commendable comeback in Buenos Aires Province that allowed deputy-elect Victoria Tolosa Paz to ridiculously claim “they lost by winning and we won by losing.” Someone, maybe Catalan political strategist Antoni Gutiérrez-rubí, the man who professionalised the Frente de Todos’ communications strategy during latter part of the campaign, may have advised Victoria to lower her profile after the elections, as she’d become prime fodder for the digital meme machine.

It’s always important to keep a critical stance, particularly of one’s own assumptions in such a dynamic environment as the socio-political-economic field in Argentina. “You better check yo’ self before you wreck yo’ self,” in the words of legendary hip-hop artist Ice Cube back in 1992. Several of the assumptions that presuppose a steady course of events stand on extremely shaky and uncertain ground, both because of endogenous and exogenous risks.

The market, one of the most imperfect forward indicators, is still trying to figure out how to make money out of all of this, giving a certain level of insight as the collective belief of a group with some sort of skin in the game. The Merval Buenos Aires Stock Exchange index has gone on an incredible rally since early April as it factored in a relative victory for the opposition coalition, Juntos por el Cambio. It flattened out a bit after the PASO primaries, but ultimately peaked coming into the election, capping off a 105 percent rally. Since then, it’s had a substantial slide, but still remains well above its previous values. The Global X MSCI Argentina ETF, a security that tracks the value of Argentine assets, has already erased its electoral gains, dropping back to its values in April, while the market for restructured Argentine bonds remains absolutely depressed hitting eight month lows as paper expiring in 2035 traded as low as 29.3 cents on the dollar.

The first major assumption is that Argentina’s government will reach an agreement with the IMF to restructure its massive debt load, which the sovereign cannot pay. Economy Minister Martín Guzmán was brought in to do this, and he tried to start laying the bricks in the 2021 Budget before being smacked down by Cristina Fernández de Kirchner, who told him it is impossible to win elections while cutting subsidies on utilities. Guzmán, who lost all authority when he was publicly humiliated by Kirchnerite political association La Cámpora by being disallowed to fire a fourth-line official within his portfolio, has kept the charade going with IMF chief Kristalina Georgieva, G20 finance ministers, and his influential academic colleagues.

Now, with the election behind us, time for a deal is running out. Argentina must make an interest payment in December and faces a tough payment calendar in the first quarter of 2022 that it is unable to face. Alberto Fernández did promise he will send a “multi-year” plan to Congress in the first week of December in order to negotiate the IMF deal with the opposition (one of the Fund’s initial requests) and it must include an orthodox plan to slash the deficit that includes cutting energy subsidies and reducing pension payments. It will also require Argentina to seriously reduce its monetary financing of the deficit and lift currency controls, which could cause a shock devaluation. Is the Fernández-fernández administration willing and able to do that? Is Cristina ready? Both Alberto and Guzmán claim she is.

The second assumed circumstance is Juntos’ return to the Casa Rosada with Rodíguez Larreta taking the top job. The City mayor did win an internal battle against the coalition’s hawks and the Radical Civic Union (UCR) in order to place his main candidates in the two Buenos Aireses (Ciudad and Provincia), and many suggest he “stepped into the ring too early.” Indeed, there are several hotshots looking to take that spot from him, starting with none other than Mauricio Macri and his stooge, Patricia Bullrich. Neurosurgeon Facundo Manes, who ran a fairly successful campaign in the province against Larreta’s candidate (Diego Santilli) has made his pretensions clear, while many suspect Radical Senator Martín Lousteau could be looking for his big break. Even among the centrists, many are already postulating María Eugenia Vidal as the coalition’s candidate for 2023, despite the former governor being Rodríguez Larreta’s ticketleader in the City. Additional pressure from outside, with liberals like Javier Milei and José Luis Espert nibbling at Juntos’ electorate, makes the situation even more complex and unpredictable. Both of those scenarios seem to suggest an external equilibrium that is far from guaranteed. Covid-19 appears completely under control in Argentina, even in the face of the Delta variant wrecking havoc across Europe while failing to impact South America meaningfully. Yet, Europe is returning to lockdowns and flight restrictions in the face of the Omicron variant and dangerous increases in cases and intensive care hospitalisations, particularly in Germany. A new wave of coronavirus infections, hospitalisations and deaths could be on its way to Latin America, which would disrupt a nascent economic rebound that Argentina badly needs. At the same time, the global financial ecosystem is far from stable. Not only would a new round of Covid restrictions potentially throw global markets into disarray, but a change in cycles is brewing inflation in the US and Europe and several other regions as supply chain disruptions and bottlenecks have added to fluctuations in demand. Expectations of interest rate hikes in the US could also lead to a changing economic cycle which could negatively impact emerging markets.

Political actors in Argentina are stuck talking about the 2023 presidential election, and who will be leading the tickets. But before we get there, they must navigate a world of extreme complexity and fragility. They better check themselves before they wreck themselves.