Todo por no hacerle caso a Lopez Murphy

Si la Alianza, y en particular el Presidente De la Rua, hubiese apoyado el recorte de gastos que propuso Ricardo Lopez Murphy, hoy Argentina sería un mejor país. La esperanza es que Macri aprenda de la experiencia del caso Lopez Murphy.

Although the fiscal problem (like the size of the state) was not even remotely what it is today, the announcement made a big part of the government of that time nervous. They did not greet the news of austerity measures and fiscal reforms with enthusiasm.

Thus began the pressure for the president to take away his support of the new minister who was simply doing what he had to do.

The story ended with the departure of Lopez Murphy from the Ministry of Economy, after a management that lasted 15 days. The political class turned into dogma an interpretation of what happened: “If you want to say and do what you have to do, you will last two weeks like López Murphy.”

What followed in Argentina, which sought to look for painless magic solutions, was a catastrophe that brought the government to its knees, ended currency convertibility and wiped out bank deposits, and led to massive civil unrest that generated 39 deaths, and five presidents in a week.

Facing a new problem due to high public spending and fiscal deficit (much more worrisome than in 2001) and a similar attitude of trying to find magical solutions that avoid the necessary cuts to state spending, economist Roberto Cachanosky warns: “Macri’s government has not learned the lesson from the Lopez Murphy case.”

In the economist’s view, while the Cambiemos party considers the possibility of spending cuts to be unviable due to fear of the events that followed the Lopez Murphy case, the correct reading should be the exact opposite:

“For not having made the logical reforms at the time proposed by Lopez Murphy, we ended up with the corralito, the default, the devaluation, the confiscation of the deposits, a fall of 15% of the GDP, and a big explosion in the poverty indices. The cost of not getting your fiscal house in order is significantly greater than any political cost you can have.”

Copiado de Argentina: Macri Government learns wrong lessons from the past.