Watching Monday night’s presidential debate from a country that has been bankrupted by populist economic ideas was instructive: Argentina’s experience shows that good countries can make very bad political decisions that have lasting costs.
Visiting here with Treasury Secretary Jack Lew was also a reminder of how intently the rest of the world is following this year’s U.S. election campaign. American power remains a basic ordering principle of global life, however much Uncle Sam is maligned. So when Donald Trump proclaims, as he did Aug. 8, that “Americanism, not globalism, will be our new credo,” people wonder if the U.S.-led system may be buckling.
Where is America going? That was the theme of nearly half the questions at Lew’s forum with students Monday at Torcuato di Tella University here. He was careful not to give a political answer hours before the debate, but he told one questioner: “I hear a great deal of nervousness about what U.S. policy will be. It determines confidence in whether there will be a stable world.”
Hillary Clinton had many good moments in Monday night’s showdown. But if you were watching from abroad, what probably resonated most was her assurance near the end that if she’s elected (surely more plausible after the debate ended than when it began) there will be continuity of U.S. foreign policy.
“People around the world follow our presidential campaigns so closely, trying to get hints about what we will do. Can they rely on us? Are we going to lead the world with strength and in accordance with our values?” She answered the questions I have been hearing here and around the world this year as our strange campaign has headed toward what the world fears is an American inflection point.
Clinton nailed this theme, contrasting her clarity on global policy with the meandering fluff-head who stood next to her: “It is essential that America’s word be good,” and she assured global debate-watchers that it would be. It would have been more comforting if she had also endorsed the free-trade system on which the world’s prosperity rests. But Monday night, she was caught in the backwash of Trump-infused (and partly misplaced) public anger about the supposed harm of trade agreements.
We’ll see if the American public regards Clinton’s performance as presidential. But I’d guess that in global capitals, there was a sigh of relief Monday night that maybe American politics isn’t heading off a cliff after all.
Argentina is a case study of how populist policies can break a country — and how long it takes to put an economy back together. For more than a half-century, Argentina experienced a chain of leftist promises from such leaders as President Juan Perón and his charismatic wife Eva, and later by their political heirs, Néstor Kirchner and Cristina Fernández de Kirchner, who both served as president. They appealed passionately to working people, even as their actions helped to enrich a corrupt elite.
Bad (if popular) economic policy led Argentina into hyperinflation and then, in 2001, to a crippling default on its debts. The road back took 14 years. Finally, last November, Argentina elected a center-right business executive named Mauricio Macri who was a kind of anti-Trump. He vowed to cut subsidies, negotiate an agreement with creditors and bring an isolated Argentina back into the world economy it had divorced catastrophically in 2001. Lew has been working closely with Macri and his team since January to help reconnect Argentina to the global financial system.
Macri hasn’t had it easy. Popular anger at the elites, fueled by strong leftist parties and trade unions, remains strong. On Monday, demonstrators partially blocked the way to the finance ministry where Lew was meeting with his Argentine counterpart. The country’s largest trade union has called for a general strike next month to protest Macri’s subsidy cuts and other painful reforms.
Good economics is harder to sell than bad, as the U.S. election campaign has demonstrated. Here, Macri’s popularity has fallen from 63 percent in December to 40 percent. But inflation has begun to slow from an annual rate of more than 40 percent to about 1.5 percent a month, according to government officials. Macri is hoping for modest 3.5 percent economic growth next year, aided by Argentina’s ability, at last, to borrow again on global financial markets.
Lew reminded his Argentine audience that it’s impossible to separate from the world in a globalized economy. Hopefully, American voters will come to understand this lesson before Election Day. Otherwise, the United States will learn it the hard way, as Argentina has.