Every time the Minister of Trade in Argentina seeks to reverse the price hike with a total or partial freeze, for short or long periods as a goal, as an objective of the administration Jose Per Gelbard in Hacienda between 25 May 1973 and 21 October 1974, under the third presidency of Juan Domingo Perón, as a stage “zero inflation”, which was never achieved, except in part during the convertibility times of the 1990s, due to the strength of the 1-to-1 exchange rate anchoring between the peso and the dollar, combined with structural reforms and the previous collapse of the economy with the damage caused by a prolonged hyperinflationary process, between the beginning of 1989, with brutal peaks of price hikes between June of that year and the end of the following year Approximately.
Gelbard’s view of inflation was similar to that of his student, the new Commerce Secretary, Roberto Feletti: It was produced by distributive bargaining between prices and wages—firms and unions—and this drove up costs, setting an ever-increasing spiral. Subsequently, From his point of view of economics, this circle can be broken by bringing the parties together at a table: businessmen, unionists and government, and establishing a relative price structure.. Then it was believed that two years were enough to permanently stabilize prices and change expectations, and now it is believed that 90 days will be enough.
Gelbard’s view of inflation was similar to that of his student, the new Minister of Commerce, Roberto Feletti: it was produced by a distributive supply between prices and wages.
He has also written several times in Infobae The Economist Roberto Kashanowski: “Most of the political forces of the time, like Kirchnerism now, believed that the problem of inflation had to do with the costs of production, when economics showed that it is not costs that determine prices, but prices that determine the costs that the firm may incur,” according to what consumers prefer. And their demand and production capacity and import companies of goods and services.
The interlocking system implemented by Minister Jose Per Gelbard and his team was similar to what Feletti is now trying to control prices: “It proved that for a while companies could not launch new products, change the packaging or the quantities they sell. There were 23 commissions controlling prices, company by company, Dedicated to analyzing production costs and then determining an estimated rate of return.
As now, the scenario was preceded by a prolonged period of stagflation and stagflation, and it was deemed necessary to boost consumption and reduce inflation with price controls, then to generate governance and now to reverse the adverse outcome in the midterm primaries. Final elections on November 14.
In 1973, the price freeze was intended to create governance, now it is an attempt to reverse the opposite outcome in the midterm primaries.
For this, Minister Gelbard implemented an income policy called the Social Pact With the participation of the General Economic Union (a fourth-class national business entity consisting of national business federations and federations from different provinces, a representative of the chambers and business centers of each locality, founded in defense of the citizens of SMEs), the CGT and the State, who signed on May 30 of that year “National Commitment Law for Reconstruction, National Liberation and Social Justice”, with an original validity of two years, although it has been amended twice.
Now, due to urgency, and despite the attempt by the Secretary for Strategic Affairs of the Government, Gustavo Pelez, to promote the establishment of the Economic and Social Council, as well as with businessmen, trade unionists and the existence of the nation-state, the call was one-sided, only for entrepreneurs, first with the proposal to define “zero inflation” for 900 products essential in the consumption of the population, but this, in a few hours, and by individual improvisation, has been expanded to 1,247 products (although reduced to less than 10% if differences in presentations and slight modifications in their properties are excluded), nor Covering only the goods from the basic family basket, but also national and imported premium alcoholic beverages, hygiene and cleaning items that far exceed the “basic” feature.
It must be remembered, as now, that the picture of the economy at that time was very similar to the current loss of cash reserves, despite the imbalance between imports and exports due to a climate of distrust due to the lack of an economic plan, international discredit and traps for capital movements ; The rate of inflation accelerated and the purchasing power of wages decreased.
The history of price controls, freezing, stewardship, administration, and any other form of attempting to force markets to sell at “agreed” prices, whether with “price-forming” firms, or by decree, has been known to date back more than 40 centuries ago. Breaking the force of gravity installed in Argentina for nearly 70 years, when the Minister of Economy headed by Maria Estela Martinez de Perón, Alfredo Gomez Moralesorders were issued to freeze the prices of basic consumption such as food, hygiene and medicine; It extended to leases, leases, and exchange control that are almost always present, looking for a nominal anchor.
Zero inflation had short-term effects, and had to be abandoned when fiscal deficits became chronic, and there was no way to finance it except with the issuance of the peso by the central bank and the deposit of debt.
How now, inflation was above 50% of the year. This measure had short-term effects, and had to be abandoned when the fiscal deficit became chronic, and there was no way to finance it except by issuing the peso by the central bank and depositing the public debt.
Various experiments, with cosmetic modifications and a range of selected products and services, were tried in the following decade, some with Supply measures and ban on meat consumption and poultry imports, where futile attempts were made to stabilize prices between supply and demand in the following decade, without ever breaking what was already underpinning a long history of high inflation.
The reason is very simple. It is impossible to reverse the inflationary process with measures aimed at alleviating the consequences and not the causes of the continuous and generalized increase in the prices of the economyExcess public spending over a state’s ability to generate real income through taxes that do not threaten investment, employment, and basic household consumption.