Tuesday, August 31, 2010

Sir, I have a bone to pick with you

From the Economist's online edition comes this article about the Argentine government's offensive against Clarín, the nation's media conglomerate. After describing the Kirchner's efforts to "kick Clarín out of the ISP business" and "wrest control" of its share in Argentina's newsprint company, Papel Prensa, the author, D.P., makes the following conclusion:
By declaring war on Argentina’s most powerful opinion-former, the Kirchners are gambling with their political future. If they can bloody the company enough to make its management seek a truce, they could secure friendlier coverage of the 2011 presidential election. Even then, however, the strategy might backfire. First, it has made them look hypocritical: by trying to kill Fibertel, they have made the already-concentrated ISP market even more so. Moreover, they have given the fractious opposition a new cause to unite around.
For the first time, I actively disagree with the Economists' appraisal of the facts. Kirchner, I feel, is actually winning political points in this campaign against Clarín. No one I met there truly supported them. The left excoriated Clarín as a propaganda machine for the wealthy.1 Moderates admitted that it attacked the government more than necessary, and preferred to read La Nación. Above all, almost everyone felt uneasy by Clarín's near-monopoly status over print, radio, and television media.

The backdrop of President Kirchner's actions, which the Economist article strangely omits, is the push to pass La Ley de los Medios (The Media Law), whose explicit intent and purpose is to trust-bust Clarín's monopoly. Although the law is controversial (like everything in Argentina), it enjoys broad popular support. Here, for example, is a snapshot of the turnout for the rally in favor of La Ley de los Medios outside Congress in Buenos Aires in late April:

Most people I talked thought the law was a good idea. The professor who taught my peronismo class, someone who struck me as an intelligent and consummately careful scholar, opposed it, but only because she thought it was badly crafted. The law would simply replace Clarín's monopoly with a government monopoly, she said, but she didn't disagree that something had to be done about Clarín.

So I don't know why D.P. feels that the Kirchners are "gambling with their political futures." Perhaps the issues of Papel Prensa and Fibertel, both of which developed after I left Argentina, have created new opposition or turned the tide of opinion. But I doubt it.

Update (Sept. 1, 11am):
Another point, which I forgot to mention—The article, entitled "Pressed," portrays Clarín as a poor victim of government abuses. I think the abuse really goes both ways. In any case, I don't think anyone feels sorry for Clarín.

1. I've heard people claim that Clarín has fabricated facts, grossly misrepresented inflation, and engaged in all kinds of journalistic malfeasance; but in Argentine politics there are so many claims and counterclaims flying everywhere that it's difficult to assess their veracity.

Bonus Feature!

The article offers this link (available only in Spanish) to a government report on business dealings with the Papel Presna company. The report is full of account balances, citations of laws and decrees, and other boring details, but in true Argentine fashion that doesn't stop the authors from proclaiming this issue as a matter of the most profound human rights. The excerpt from the Acknowledgments section reads (with my translation):
We thank especially those people who, having been participants in these acts, through their testimony permitted us to reconstruct an era of history in which were carried out the most dark and horrible acts of of physical, moral, and psychological violence that human beings can suffer.

It should be highlighted the interest demonstrated in the search for the Truth, shown by all the institutions, organizations, and people who, in one way or another, and from their respective places, helped with their contributions so that this present report would illuminate a part of history that tried to be submerged in darkness until it fell in negation, lies, and oblivion.
They're obviously referring to El Proceso, the brutal internal genocide that took place during the military dictatorship of the 70s. Many of the incidents of this report probably also take place during the 70s, and I'm sure that the business dealings they describe are pretty messy, and probably involve violence—but there's no way it can compare to the torture, murder, and rape of the era they are so strongly evoking.

Monday, August 30, 2010

What Makes the Dollar Special?

One of the most jarring things about America after returning from Argentina was seeing so many dollars bills everywhere. I remembered sitting in my Monetary Economics class at my university in Buenos Aires, listening to the professor drive home the point that Americans use the USD as local currency. They don't see anything special about it!, he exclaimed, wide-eyed and emphatic, as if it were an utterly preposterous idea.

And he's right, of course; we Americans look out and see the plurality of currencies and assume ours is just another member of the ranks.

Argentines, however, have an entirely different point of view. Argentina has what they call a "dual currency," which means that dollars are just as standard a medium of exchange as the Argentine peso. For example, most restaurants have a sign on the door that indicates the rate at which they exchange dollars and euros. Apartments are bought and sold in terms of dollars, not pesos, which means Argentines maintain dual accounts of pesos and dollars. I saw wealthy Brazilians vacationing in Patagonia with a stack of crisp $100 USD bills in their wallets, and I even saw Argentines with large sums of USD, even while they were traveling within their own country.

So then, what makes the dollar so special? Why does it hold such a privileged status in other parts of the world?

Most of all, because it is highly stable. Inflation is usually very low, America has never defaulted on a loan, the US Federal Reserve is highly disciplined.

That may sound incredibly boring, but it is enough to get an Argentine who's lived long enough teary-eyed. Just over the past 30-40 years alone, the Argentine monetary authorities have dropped about 13 zeros off the currency; prices were rising so fast during the hyperinflation of the 80s that grocery stores couldn't relabel their items fast enough; and in the 2001 economic crash the dollar exchange rate jumped from 1:1 to 4:1 overnight.

In response to such a high degree of instability, Argentines have sought refuge in the dollar. Highly durable goods, like apartments, are priced in dollars to protect against wild, transient fluctuations. During hyperinflation, even school kids as young as 10 had come to learn that as soon as they obtain extra spending money the first thing they should do is invest in USD.

Even in stable times, like now, holding pesos is still inferior to holding dollars. The exchange rate may say 4 pesos = 1 USD, but in all practicality the two are not equivalent. Having four Argentine pesos is just not as good as having one small dollar. The reason is that although the peso may be stable today, there is no guarantee it will stay stable tomorrow. The fragility of the Argentine market means that holding pesos always carries with it an implicit risk of devaluation.

By the same token, holding dollars carries with it an implicit guarantee from the US government that the currency will preserve its value over time. Because Latin American governments have a history of irresponsibly financing extra spending by printing more money (i.e. inflation), their central banks maintain a reserve of dollars to keep their populations' anxieties at bay. The idea is that if anyone loses faith in the local currency, they can simply swap it out for dollars.

Note how the dollar acts as a monetary guaranteer of the last resort: when people lose faith in all currencies, they turn to the dollar. Thus, what makes the dollar special is that everyone in the entire world trusts in it. It also means that the United States is not only underwriting the monetary stability of its own citizens, but also that of the entire world financial system. Everyone assumes that in a panic at least they'll be able to salvage their savings by converting them to dollars.

The USD is therefore not just another currency, but rather a promise. A promise that in this fiat world of meaningless paper bills, your savings actually mean something.

Friday, August 27, 2010

Paradigm Shift

When I arrived on campus this semester I noticed a marked difference in the way I thought about the university compared to when I first arrived. As a freshman, and even as a sophomore, I'd think of the university as a separate entity from me—an institution that runs by the grace of other people, with programs designed and run by other people, and a culture set by other people. I'd evaluate the university as an outsider would: What are U of A kids like? Are the clubs run well? Do they offer fun programs and activities?

Now that I'm a junior, neck-deep in activities and programs, I realized that I'm no longer on the outside looking in. The incoming freshman class must be evaluating the university the same way I did (What are U of A kids like? Are the clubs run well?...), but now I realize that whom they're judging is really us, the upperclassmen. The questions I used to ask of others are now directed at me—What are we like? Do we run our clubs well? Do we come up with new, fun, and innovative programs and activities?—because in your junior year you realize that there's no one else who make the university run but ourselves. Our culture is the university's culture. Our brains are the university's brains. Our drive is the university's drive.

Here's an example of what I mean. Currently the International Studies program offers a colloquium series on various regions of the world. It's an innovative idea, most of all because the colloquia are taught and designed by undergraduate students who have visited the regions they discuss. As a freshman or sophomore, I would have thought it was the university who was giving the opportunity, and students were simply receiving the benefits. However, when I learned that the colloquium was actually the brainchild of a student here at the U of A, I saw the student-university relation in a broader light: The university may provide opportunities to students, but students can also provide opportunities to the university. The plethora of programs and activities that we have exist because of someone, and continue to exist because someone is working to maintain them.

Every part of the university is supported by the students that form it. On a more day-to-day basis, take for example the tutoring center. If I were a student who came for help and had a bad experience, I would think that the university had a bad tutoring center. I'd tend to interpret the faults of individuals as the faults of the university. But since I work at the tutoring center, my thinking goes the other way. The quality of the university's tutoring center becomes partly my responsibility when I realize that students anxiously waiting for help at the tutoring center are relying on meto do a good job.

I think this personal shift in thinking also represents a broader sociological principle. Although we like to think of institutions as formal, abstract concepts, when you get into the details, as in this example, you realize that everything about an institution remits back to the people who form it. Some people are, of course, more involved than others, and that seems to influence the degree to which you identify yourself with the institution. But everyone plays a role, whether they realize it or not; and perhaps the bigger the stake that everyone has, the more successful the institution will be.

Wednesday, August 25, 2010

I'm still here

I haven't forgotten about the blog. The reason why I haven't been publishing the last couple weeks is that I've been hard-pressed to find a complete, meaningful thought to write about.

Now that I'm back at school after this long break, I'm really appreciating how much it stimulates new thinking. Just in the past two days of classes I've already faced ideas that have forced me to reconsider my judgments, convictions, evaulations, and beliefs. As I continue to reflect, the precipitate should manifest itself in some new blog posts in the coming days.