Fear of falling

Observatorio argentino 56: The fear of disorder keeps people from radicalism

The world descended into chaos. Money ceased to function and people needed to resort to barter to acquire life’s basic necessities. Professional jobs evaporated. People feared that the power would go or the water taps not turn on. Crime skyrocketed. Everyday life became defined by brutality and cruelty. Demonstrations became riots. Mobs looted shops. Building burned. The President fled the most powerful office in the land in a helicopter. All that was solid melted into air.

That was a scenario for a near-future Manhattan in Random Acts of Senseless Violence, a novel that deeply shook me when I first read it in 1995.¹ It was also what happened to Argentina in 2001, down to having the President flee the White Pink House in a helicopter. And that was the second time in living memory that Argentine society had collapsed. In 1989, a peacetime hyperinflation escalated, food became hard to buy, and chaos ensued.²

The suburbs of Buenos Aires are more precarious than they appear from the highway

Two days ago, a wave of looting hit Argentine supermarkets. The size of the wave isn’t yet clear. The international press reports 30 arrests; local papers report more than 50 arrests at least 96 arrests in the Buenos Aires suburbs alone. The press reports supermarkets hit in the suburbs of Escobar, José C. Paz, Merlo, Moreno, Morón, and Tigre; I have firsthand reports that can add Pilar to that list. The number of arrests isn’t a great indicator of the severity of the looting: when police do their jobs well, arrests should be small. For example, a fast response by the Buenos Aires P.D. and the national Gendarmerie in response to 911 calls resulted in only one arrest but dispersed large gathering mobs.³ You can find a national map of confirmed incidents here.

This is a backyard photo of José C. Paz, Buenos Aires, one of the suburbs mentioned above

The causes aren’t clear. Some politicians are claiming conspiracy, but that is commonplace—I will be honestly shocked if such claims prove to have any substance. Milei’s victory in the primary seems to have shaken up both investors and common people. Ironically, the black market exchange rate has stabilized, but I keep hearing reports that the government is cracking down on illicit exchange houses and it’s becoming hard to find a place to buy dollars.

The fear of an estallido social unites a lot of the opposition to Milei. Would the drastic budget cuts he champions ignite disorder like 2001? Would the expectation of dollarization provoke a self-reinforcing hyperinflation (as people moved to dump their pesos as fast as they could) and bring about another 1989?

The short answer is that we don’t know. First, we don’t know how radical Milei will be in office. We know that he won’t face many institutional constraints: he has decree power and the JxC conservative coalition will almost certainly go along with much of what he wants. But reality gets a vote and Milei has always been careful about the meat of his radical economic promises. “When did I talk about massive public sector layoffs?” he says. “Career public officials cannot be touched. Only those who are functional to thieving politicians.” His chief adviser, Darío Epstein, added, “The first thing we have to do is to lower the fiscal deficit by 5 percentage points, which is not at all easy. As Argentina is in a very critical situation, with 40 to 45 per cent poverty, what we can’t do is to fire people from the public sector or lower social spending. That is very important.”

Second, we don’t know how dislocating radical policies would actually be. A future post will get more into the weeds, but a lot of Argentine spending is on energy subsidies to wealthier people. And there are other potential economies. As for dollarization, if it happens (which at some level I doubt) then its short-term results are uncertain.

Finally, Argentina is on the verge of a large resource boom, driven by quantity more than price. That’s not necessarily great for long-term development but it will make any short-term adjustments a lot easier.⁴

Too be fair, some of the suburbs of Buenos Aires look like Miami

My intuition is that President Milei will turn out to be rather less revolutionary than feared. Argentina won’t slide into a year like the one depicted in Random Acts of Senseless Violence. But I understand the fear.

1. I still recommend the book. I had to take a long moment to meditate just from the memory of reading it for the first time; it’s that sort of book. For what it’s worth, I grew up in the New York of the 1980s and I have been under fire in war zones and the book’s prose still frightens me.

2. President Raúl Alfonsín did not have to fly out of the presidential palace in terror the way Fernando de la Rúa did in ‘01. I met De la Rúa in 2005. He looked haunted.

3. Residents of the Bajo Flores neighborhood attacked presumed looters with sticks; a lot of the police work involved separating the groups before the violence got worse. Guns are much less common in Argentina than they are in the U.S. or Mexico but it isn’t Europe.

4. And what does the long-term mean anyway in the face of recent advances in artificial intelligence? Fifteen years ago, even ten years ago, I had some vague idea of what 2050 or 2100 would be like. I don’t anymore.