Ramiro Eugenio Álvarez (Posdoc UNM-CONICET)
At the risk of an oversimplified distinction, two theoretical traditions can be individuated among the explanations of inflationary process (Lavoie, 1992, p. 372). On the one hand, we can find explanations compatible with conventional theories of value based on demand and supply curves, highlighting the pressure over prices pulled by demand forces, mainly public spending, while capitalist economies are presented as self-regulated systems in which factor-substitution mechanism ensures full-employment output and prices as scarcity indexes as a long-period positions[1] (Cf. Lipsey, 1960; Wicksell, 1898, Hahn, 1981). Within this conventional approach, a natural rate of unemployment is defined as the rate associated with an equilibrium real wage, being the non-accelerated inflation rate unemployment (NAIRU). In sum, any public intervention oriented to reduce unemployment below the NAIRU triggers inflationary process.
On the other hand, those frameworks that recall the classical theory of value and distribution, focused on the dynamics of cost determinants as main drivers of rising-price dynamics, the so-called cost-push theories. Under these perspectives, inconsistent claims of workers, entrepreneurs and landowners regarding income distribution, persistent devaluation of the national currency and the widespread indexation of contracts would lead to accelerating inflation (Cf. Diamand, 1972; Furtado, 1959; Okishio, 1977; Resende, 1981, Stirati, 2001).
These debates exert influence in designing price-stabilizing programs since its origin, in the 1920s, when the international committee was created to analyse Weimar Republic’s economic situation (Llach, 1987). Within the neoclassical perspective, fiscal consolidation, exchange rate liberalization, rising interest rate or the control of monetary aggregate are traditionally the set of measures recommended to ensure a stable path of inflation. On the contrary, non-conventional tradition, stabilization plans were oriented to adopt different measures, such as: the convergence towards a stable path of exchange rate, price-freeze, the adjustment of trade imbalances, the reprogramming of external commitments (Cf. Frey & Eichenberger, 1994).
However, after Capital Debates (Cf. Lazzarini, 2011), neoclassical theory proved to be unable to determining equilibrium prices as relative scarcity indexes towards which the market mechanisms ensure the convergence of effective prices in economies with physically heterogeneous capital goods. In a few words, the impossibility to guarantee that factor substitution mechanisms operate in the direction needed to obtain negatively-sloped demand curves for capital (as a single magnitude) undermines any consistent determination of factor remunerations as adjustable variables to achieve full-employment positions (Cf. Garegnani, 1978, p. 324; Petri, 2004, p. 32). The difficulties in providing a theoretical framework that presents full-employment output allow us to leave aside demand-pull theories. By using non-conventional frameworks, an analytical reconstruction of Argentine political economy from 1973 to 1992 is presented in the following sections, focusing on accelerating inflation and hyperinflationary phenomena observed during such period and the political attempts to stabilize and mitigate price variation.
The article can be divided in two parts, the one that revisit the cost-pushed theory of price dynamics and a second part that re-elaborates both the Argentine political economy during return to democratic order and the long road to price stability achieved by the beginning of 1990s. The theoretical revision is provided for a price-taker, semi-industrialized economy and focused on cost-pushed theories of inflation, based on three price drivers: the class antagonism highlighted by Classical Surplus Approach, inertial mechanisms stressed by Neo-Structuralist theorists, and foreign currency shortage, inspired in German Hyperinflation and Latin American Structuralism. In a second part, the article analysis, in the light of the latter theoretical revision, the multiple stabilizing programs applied in Argentina during the 1970s and 1980s.
In this sense, the main hypothesis presented by the article stresses the role played by the exchange rate in stabilizing distributive claims and therefore price dynamics. The external shock of international prices in 1973-1974 and the foreign currency shortage, along with Perón’s death (the container of distributive claims), undermined the basis of Gelbard’s social pact. The Austral Plan (1985) is here analytically reconstructed, presenting the crawling-peg policy as the main destabilizer of the stabilization program. On the contrary, the Convertibility Regime (1991) is described as exchange rate-based strategy to control the price dynamic at the expense of deepening the financial dependency of Argentine economy.
After this introduction, a second section analytically studies three sources of cost-pushed inflation for a semi-industrialized price-taker economy. Since the independent nature of the cost-pushed sources of inflation, three subsections are presented. The first subsection assumes a very simple productive structure, the corn-seed economy, in approaching from a classical revival perspective the growth path of corn-price led by class-antagonism and propagation mechanisms associated with wage indexation. In second subsection, the corn-seed economy is extended to the open economy framework. We follow by approaching the explosive growth path when the persistent distributive conflict generalizes indexation and foreign currency shortage triggers devaluation and the hyperinflation. In this section the models are integrated, and the outcome is used in the following sections.
On the basis of this model, we proceed by analysing three stabilizing experiences (Gelbard’s Social Pact, the Austral Plan and the Convertibility regime) in Argentina, individuating the distributive configuration behind the programs, the dynamics -and shocks- of the foreign variables (international prices, interest rate and exchange rate) and studying their impacts on the stability of prices and distributive claims. Finally, the main conclusions of the article are presented.
[1] In this conception, money is essentially understood as neutral, implying that introduction of purchasing power by economic policy is not able to induce persistent increases in real output level and employment.
