Expectations of State Power: the Political Economy of Argentina’s Debt Crisis and Recovery

• In Event: 40860 - Section on Economic Sociology Roundtables
  In Refereed Roundtable (60 minute): Table 3. Neoliberalism revisited

Abstract

Conventional accounts of economic crises and the state implicitly or explicitly center rational expectations. In this frame, crisis risk and economic recovery are both understood to be functions of objective state capacities and the rational response of investors to macroeconomic policy. In this study, an in-depth case analysis of Argentina’s infamous financial crisis of 2001 reveals the explanatory limits of this approach. Using archival materials, I carry out a close analysis of the domestic political economy of the Argentine debt crisis and focus in particular on the proliferation of local “complementary currency” circuits – ad-hoc, scrip-like fiat currencies backed by local units of government. Reviewing in particular Argentina’s unique legal and political frameworks for federalism, I show how these complementary currencies began life as peso-denominated bonds but quickly took on a life of their own – with the two largest instruments alone comprising nearly 25% of Argentina’s circulating M1 money supply at their height during 2002. Through the lens of these complementary currencies, I theorize the idea of ‘expectational power’ to refer to the capacity to set and maintain widespread “fictional expectations” (Beckert 2016) about the future. I argue that fictional expectations concern not only rational projections of the future, but also embodied habits as well as conceivable imaginations of the economic world itself. Using this framework, I show how the 2001 debt crisis was primarily attributable to a process of breakdown in domestic political legitimacy and destruction of trust in institutions – a loss of expectational power. Conversely, Argentina’s 2003 “Monetary Unification Program” to restore centralized monetary stability succeeded to the degree that it altered money users’ expectations, but was ultimately limited by the state’s focus on international capital and rational-legal austerity discourses.

Author

• Jack Votava, Northwestern University