2023-08-30 03:30:00
Alberdi, an enormous thinker of freedom, masterfully explained in his writings the foundations of sound currency and the need for a tax office that does not attack people’s liberties. Regarding the irresponsible issuance of money, he maintained that “The issuance of paper money is a terrible means of ruining political liberty, the morality of industry, and the treasury of the State. As long as the government has the power to make money with simple strips of paper that promise nothing, the all-encompassing power will live unaltered like a gnawing worm in the heart of the Constitution.
Although the Argentine Central Bank is following Alberdi, it already rejected the idea of an official bank that would be above the market, since it feared that the governments in power would use it to finance themselves at the expense of the impoverishment of the nation, since: “He can force the country under his command to lend him the full value of its wealth, by issuing that forced loan called inconvertible paper money.”
Even Alberdi, in his ”Economic Studies”, warns regarding the dangerous influence on our leadership of the inflationary and ruinous ideas of John Law, whom Murray Rothbard has pointed out as a theoretical influence on Keynes’s monetary thought. For Alberdi, “Law’s theory gradually became the rent system of South American governments.” He denounced that “according to them, to issue credit paper is to create capital”, but that this was an idea of impoverishment of a voracious state “In the absence of external loans, the evil of internal loans occurs, but always in the name of the public good and the enrichment of the country”, moreover, ”it raises for itself the millions that leave the country’s public, swindled in turn as was the foreigner”.
John Law during the 18th century argued, like many current inflationist leaders, that “lack of money is the cause of which the industries and resources of the country remain inert and without development”, and that the answer was to create a central bank that issued infinitely since its support would be the value of all the lands of the nation. This was the basis of what was called the ”Mississippi System” which exploded in 1720 with hyperinflation caused by central banking and the financial bubble of the Mississippi scheme.
Regarding the tax system, first of all, Alberdi treats citizens not as slaves but as free citizens.
The collection might never be obtained at the expense of the prosperity of the individual: ‘in the economic doctrine of the Argentine Constitution, the abundance of public income depends on the guaranteed respect for property, liberty, equality, security, in the employment of his faculties destined to produce the means of satisfying the needs of his being.
He pointed out that we are “servile machines of income, which never arrive, because misery and backwardness can yield nothing.” This “tax bondage” has not changed, according to the World Bank, Argentina continues to be the second country with the highest “total rate of taxes and contributions.” The Argentine Institute of Fiscal Analysis, identified the existence of 148 different taxes in our country.
For Alberdi, “misplaced” taxes keep away capital and immigration, “scared of an armed treasury in the name of the Republic.” Argentina is the second worst performer in the evolution of foreign direct investment so far in the 21st century. In the year 2000, the stock of FDI in Argentina represented 0.91% of the world total, in 2019 it was only 0.19%.
Central to his analysis was the budget law on the road to the development of a nation.
“The spending law (if it speaks the truth) tells us at a fixed point if the country is in the power of exploiters, or is governed by men of honor.” In the last 4 decades of the last century, fiscal deficits were accumulated in the order of 2 times the GDP.
Between 1961 and 2002, in every year there was a fiscal deficit, accumulating imbalances for the equivalent of 180% of GDP.
Between 2003 and 2008 were the only years of fiscal surplus totaling in the accumulated the equivalent of 7% of GDP. Not a minor fact, is that this was achieved thanks to a mega devaluation, historically high international prices and default on public debt. Quickly the fiscal deficit reappeared.
We are witnessing another decade of fiscal imbalances for a magnitude equivalent to half the economy, but with record tax pressure. From 2009 to 2023 they were all years of fiscal deficit once more, accumulating imbalances for approximately more than 40% of GDP.
As in 1853, today reforming the tax and monetary system “constitutes almost the entire Argentine revolution once morest its colonial regime.”
*mg. in Political Economy, Fundación Progreso y Libertad.
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