The dumbest economic policy of the year
Longtime readers of danieldrezner.com might believe that, given my rantings on the scuttled ports deal, that I would say this is the stupidest economic policy implemented this year. You would be wrong. No, when it comes to ass-backward economics, I’m afraid that not even the United States Congress can compete with Argentinian president Nestor Kirchner. ...
Longtime readers of danieldrezner.com might believe that, given my rantings on the scuttled ports deal, that I would say this is the stupidest economic policy implemented this year. You would be wrong. No, when it comes to ass-backward economics, I'm afraid that not even the United States Congress can compete with Argentinian president Nestor Kirchner. Patrick McDonnell explains in the Los Angeles Times: Argentine President Nestor Kirchner has a plan to fight rising inflation and escalating food prices: Let them eat beef. In an extraordinary decision, the government this week announced a six-month ban on most beef exports from the world's third-largest purveyor of the meat. In Argentina, prime beef is a cultural icon, rivaling tango, soccer and the late Eva Peron. Argentines are voracious beefeaters, consuming 143 pounds per capita annually. But consumers here have been grumbling about beef prices for months, and Kirchner ? a left-leaning populist often at odds with big business ? presented the ban as a way to protect his people from export-driven price hikes. The government hopes that meat targeted for overseas sale will now stay at home. Increased supplies will reduce domestic prices, which skyrocketed 20% last year, surpassing the worrisome inflation rate of more than 12%. "It doesn't interest us to export at the cost of hunger for the people," Kirchner declared. The president's edict took effect Friday. Delighted shoppers rushed to butcher shops to inquire whether prices had dropped yet from the $2 or so a pound for the prime cuts that can go for 10 times as much in the United States and Europe. "The president's move was absolutely necessary in the moment we are living," said Hector Polino, who heads a consumer group that is critical of rising prices. What will the effects of an export ban be? McDonnell summarizes this nicely: [C]attlemen said Kirchner's move would kill the golden calf. Beef exports earn vital foreign exchange for Argentina and amounted to a record $1.4 billion last year. Foreign sales rose 24%. Cattle farmers say the export ban will probably reduce supplies in the long term, cost them hundreds of millions of dollars and throw thousands of people out of work. "The plants will begin to shut down," Carlos Oliva Funes, president of Swift Armour Argentina, a large meat producer, told the conservative daily paper La Nacion. "This is like telling Colombia it cannot export coffee," said Javier Jayo Ordoqui, who heads a rancher's association outside Buenos Aires, the capital. "This is cattle country." Indeed, on Friday, prices were reported to have plunged as much as 20% at Liniers, the country's largest live cattle market. Economists predicted that modestly lower prices would eventually trickle down to consumers. Kirchner will lower beef prices -- in the most damaging, inefficient way possible.
Longtime readers of danieldrezner.com might believe that, given my rantings on the scuttled ports deal, that I would say this is the stupidest economic policy implemented this year. You would be wrong. No, when it comes to ass-backward economics, I’m afraid that not even the United States Congress can compete with Argentinian president Nestor Kirchner. Patrick McDonnell explains in the Los Angeles Times:
Argentine President Nestor Kirchner has a plan to fight rising inflation and escalating food prices: Let them eat beef. In an extraordinary decision, the government this week announced a six-month ban on most beef exports from the world’s third-largest purveyor of the meat. In Argentina, prime beef is a cultural icon, rivaling tango, soccer and the late Eva Peron. Argentines are voracious beefeaters, consuming 143 pounds per capita annually. But consumers here have been grumbling about beef prices for months, and Kirchner ? a left-leaning populist often at odds with big business ? presented the ban as a way to protect his people from export-driven price hikes. The government hopes that meat targeted for overseas sale will now stay at home. Increased supplies will reduce domestic prices, which skyrocketed 20% last year, surpassing the worrisome inflation rate of more than 12%. “It doesn’t interest us to export at the cost of hunger for the people,” Kirchner declared. The president’s edict took effect Friday. Delighted shoppers rushed to butcher shops to inquire whether prices had dropped yet from the $2 or so a pound for the prime cuts that can go for 10 times as much in the United States and Europe. “The president’s move was absolutely necessary in the moment we are living,” said Hector Polino, who heads a consumer group that is critical of rising prices.
What will the effects of an export ban be? McDonnell summarizes this nicely:
[C]attlemen said Kirchner’s move would kill the golden calf. Beef exports earn vital foreign exchange for Argentina and amounted to a record $1.4 billion last year. Foreign sales rose 24%. Cattle farmers say the export ban will probably reduce supplies in the long term, cost them hundreds of millions of dollars and throw thousands of people out of work. “The plants will begin to shut down,” Carlos Oliva Funes, president of Swift Armour Argentina, a large meat producer, told the conservative daily paper La Nacion. “This is like telling Colombia it cannot export coffee,” said Javier Jayo Ordoqui, who heads a rancher’s association outside Buenos Aires, the capital. “This is cattle country.” Indeed, on Friday, prices were reported to have plunged as much as 20% at Liniers, the country’s largest live cattle market. Economists predicted that modestly lower prices would eventually trickle down to consumers.
Kirchner will lower beef prices — in the most damaging, inefficient way possible.
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
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