Only as far as you can throw ’em

Yesterday, Argentina announced a partial rollback of natural gas and water subsidies in a continuation of what increasingly looks like the same ajuste neoliberal Cristina Kirchner and her government have been swearing for years would never happen while they held power. The rollback itself only affects certain parts of the country and doesn’t affect subsidies for industrial users at all. That, at first glance, is curious; why would the government raise prices on households (read: voters) instead of industry? That answer came in Julio de Vido’s comments during the press conference announcing the reforms. He explained that the industrial subsidies were responsible for the creation of 6 million jobs relative to 2001 and went on to laud the growth in natural gas demand resulting from those subsidies. Clearly the government thinks (probably correctly) that reduced real wages via subsidy cuts to households are less unpopular than subsidy cuts that lead directly to unemployment.

Beyond that, de Vido’s comments are telling more for what they don’t say. Creating 6 million jobs, for one, is truly astonishing in a country with 40 million people, especially if they’re the result of industrial subsidies. However comparing net jobs gained from 2001 to now is misleading; Argentina’s economic crisis was so profound that virtually any policy that wasn’t a Khmer Rouge-style return to the countryside would have created a lot of jobs just simply by utilizing the huge slack in the economy. Worse though, is his discussion of the effect on natural gas demand, when he completely ignored the comparatively slower growth in supply that has turned Argentina from a net exporter of gas to a net importer of one–the importation of which is a significant contributor to the fiscal deficits driving the galloping inflation.

The lesson in this is to be wary of statistics politicians cite, espcially when those statistics purport to prove the utility of a policy they are in the process of eliminating.

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