Skip to main content

Real Wages in Argentina

So there has been some fuss about whether Argentina default was good or not for the economy, because of a terrible article in the New York Times (here). Krugman correctly noticed that this was nonsense and was praised by Dean Baker. I think that it is important to note the role of devaluation (and noted that in comments to both blogs), but wouldn't disagree with Krugman that it's important to emphasize that defaults are not followed by catastrophes and that Argentina is actually a terrible example if one wants to make the opposite case.

At any rate, an Argentine reader (using a pseudonym) got really angry with me, and said some obviously incorrect things about Argentina (and Brazil to boot). But one of his points shows that it is important to clarify at least one fact. The graph below shows real wages in Argentina, with official data, and data from alternative sources that can be obtained in a paper by Roberto Frenkel and Mario Damill (here).



Note that real wages in Argentina have grown irrespective of what inflation index you use. And yes, in Brazil they did stagnate. The recovery of real wages is central to understand, not just the evolution of the economy, but some of the political events that lead to people, like the anonymous blog commentator, to be so angry. But as I told him, using Moynihan's fantastic dictum, a person is entitled to their opinion, not their facts.

PS: The data for real wages comes from ECLAC; the alternative index for Argentina was calculated by deflating the series with the inflation data in the Frenkel and Damill paper.

Comments

Popular posts from this blog

What is the 'Classical Dichotomy'?

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…