The Magazine


Jan 5, 1998, Vol. 3, No. 16 • By MICHAEL BARONE
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"IT HAPPENED AROUND 1991: Everything changed." The speaker is a young Argentinian investment banker, talking over coffee at La Biela, a restaurant across the park from the Recoleta Cemetery where Eva Peron is buried, incongruously, amid the leading families of Buenos Aires. The words are almost identical to ones I heard in India two years ago: "You cannot overestimate how much everything changed with the fall of the Soviet Union in 1991." Once before, I was in Buenos Aires, a dozen years back. "You visited another country," the banker says.

What changed in both India and Argentina was less a matter of conditions on the ground than of ideas in people's heads. Abruptly, the articulate elites of these countries moved from believing in socialism to believing in free markets, from championing government ownership of business to celebrating privatization, from walling off their national economies to opening them up to foreign trade and investment, from blaming the United States for almost everything that went wrong to seeking closer cooperation with the United States and convertibility with the dollar.

"People change their minds," Daniel Patrick Moynihan quotes philosopher Michael Polanyi as saying. We do not move smoothly and gradually along a continuum of ideas, but lurch sharply from one idea to its opposite. Everything changed around December 1910, Virginia Woolf once said, with her gaggle of intellectual friends in mind; everything changed for very many more people around 1991, in countries large and small across the world.

Americans find it hard to appreciate the starkness of the change. Elite opinion shifts more slowly here. If the fulcrum on the continuum has been moving to the right, the Left has a stake in minimizing the change and forgetting where the fulcrum used to be: It's funny how all those people who used to go around attacking Cold Warriors now say the Cold War was uncontroversial. We lose sight of how many aspects of their cultures countries like Argentina are trying to change at once, how great the stakes are for them, how large are the potential benefits and risks, and how profoundly the United States can affect what happens, for better or worse.

The starkest change in Argentina is economic. A dozen years ago, you had to add four digits to your peso notes to keep up with inflation: A 10-peso bill was actually worth 100,000. Now the peso is tied to the dollar by a convertibility board: Argentina's central banker is Alan Greenspan. This change was made by President Carlos Saul Menem, in vivid defiance of the traditions of his Peronist party, and by the finance minister he appointed in 1991, Domingo Cavallo. They have cut the bloated public sector and are privatizing state firms; they have reduced inflation from 3,000 percent in 1989 to 2 percent in 1996; they have spurred growth from zero in 1990 to 6 to 9 percent in 1991-94. In early 1995, in the "Tequila crisis" after Mexico devalued its peso, Argentina resisted pressure to devalue as well and took a recession instead; even so, Menem was reelected that May. The changes seem to be enduring. Cavallo is out of office, and Menem's party lost its legislative majority in the October 1997 elections. But Menem has continued Cavallo's policies, and the opposition coalition has accepted them. As East Asian currencies have collapsed and the peso's tie with the dollar has been threatened, every Argentinian politician has supported maintaining the convertibility board.

There are signs as well that Argentina is changing not just its economic policy but its political culture. As Moynihan has written, "Politics can change a culture and save it from itself." Lawrence Harrison, citing Latin American scholars Carlos Rangel and Claudio Veliz, argues that Latin countries have been held back by "the traditional Ibero-Catholic system of values and attitudes." These have included lack of future orientation, lack of a perceived connection between effort and reward, and lack of a sense of communal obligation beyond the family. These were exacerbated in the year of Juan Peron and his successors by what Mark Falcoff, America's leading student of Argentina, calls "mismanagement, corruption, and political unwisdom."