Benjamin Keen - A Short History of Latin America, 307-313 THE PERON ERA 1943-1955 Peron's Rise to Power The military coup that overthrew Castillo in 1943 had deep and tangled roots. The fraud and corruption that tainted both Conservative and Radical politics in the "Infamous Decade" no doubt offended military sensibilities, and Castillo's choice of the Pro-Ally Patron Costas as his successor also angered some of the military, who were divided in their attitude toward the belligerents in World War II. But the coup of 1943 had deeper causes. During the 1930s, the officer corps of the Argentine armed forces, predominantly middle class in its social origins, developed an ardent nationalism that saw the solution for Argentina's problems in industrialization and all-around technical modernization. The interest of the military in industrialization was closely linked to its desire to create a powerful war machine capable of creating a Greater Argentina that could exercise hegemony in a new South American bloc. To industrialize it was necessary to end Argentina's neocolonial was necessary to end Argentina's neocolonial status, to free it from dependence on foreign markets. The pro-German attitude of many officers stemmed in part from the German military instruction that they had received and from their admiration for the supposed successes of the Nazi New Order, but even more, perhaps, from the conviction that England and the United States had conspired to keep Argentina a rural economic colony. Their pro-German attitude was not translated into a desire to enter the war on Germany's side but rather into the wish to keep Argentina neutral in the great conflict. As concerned domestic policy, the military proposed a massive speedup of industrialization and technical modernization, even though it feared the social changes and forces that such transformations might unleash. In particular, it feared the revolutionary potential of the working class. In effect, the military proposed to build Argentine industrial capitalism with a thoroughly cowed, docile working class. As a result, one of the first acts of the military regime was to launch an offensive against organized labor. The government took over the unions, suppressed newspapers, and jailed opposition leaders. This policy of direct confrontation and collision with labor had disastrous results and threatened to wreck the industrialization program. The military was saved from itself by an astute young colonel, Juan Domingo Peron, who took over the Department of Labor in October, 1943 and promptly raised it to the status of the Ministry of Labor and Welfare. Born in 1895, the son of immigrant and Creole parents of somewhat marginal economic status (his father was a farmer), Peron ended the military college at sixteen and very slowly rose in rank to captain in 1930. He played a minor role in the coup of that year. During the next decade, he spent several years in Europe, where he was much impressed by the German and Italian dictatorships. In 1941, Peron joined the Group of United Officers, although only a junior colonel, and quickly rose to its leadership ranks. He was prominent in the colonels' clique that replaced the GOU in power in 1944. Beginning with a subcabinent post as secretary labor and welfare, Peron became the indispensable man in the Ramirez government. He subsequently became vice president and minister of war, in addition to secretary of labor and welfare. Peron's genius lay in his recognition of the potential of the organized and unorganized working class and the need to broaden the social base of the nationalist revolution. He became the patron of the urban proletariat. Workers were not only encouraged to organize but favored in bargaining negotiations, in which his department participated. As a result, workers' wages not only rose in absolute terms but their share of the national income grew. This, of course, increased mass purchasing power and hereby promoted the process of industrialization. Peron also created a state system of pensions and health benefits, with the result that employers' contributions for pensions, insurance, and other benefits rose steadily until the year of Peron's fall (1955). In return for these real gains, however, the unions lost their independence and became part of a state-controlled apparatus in Peron's hands. Meanwhile, Peron was strengthening his position within the military. In February 1944, he led a group of officers in forcing the resignation of President Ramirez, who, as noted previously, was replaced by General Farrell. Not all of the military was happy with Peron's prolabor policies or with his meteoric rise to power. The end of the war in 1945 also provoked civilian demands for an end to military rule and the restoration of the constitution. In October 1945, Peron's military and civilian foes staged a cup that resulted in his ouster and imprisonment. But the organizers of the coup were divided and unclear about their objectives, and Peron's followers mobilized rapidly. Loyal labor leaders organized the Bueno Aires working class for massive street demonstrations to protest Peron's jailing. The workers virtually took over the city, without opposition from the armed forces. The bewildered conspirators released Peron from prison. Thereupon, he resigned from his various government posts, retired from the army, and began his campaign for the presidency in the 1946 elections. In preparation for the election of 1946, Peron taking due account of the defeat of fascism in Europe, cast himself in the role of a democrat ready to abide by the result of a free election. He created a Labor party to mobilize the working class, the principal component in a class alliance whose other major elements were the national industrial bourgeoisie and the army. Peron's chief opponent was Jose Tamborini, candidate of the Union Democratica (Democratic Union), a heterogeneous coalition of conservative landed elite, the bureaucratic and professional middle class that traditionally supported the Radical party, and even the Socialist and Communists parties. Peron defeated Tamborini, by 300,000 votes out of 2.7 million. He was helped in the election by the blundering foreign policy of the United States, whose State Department issued a Blue Book blasting Peron for his fascist ties. Peron countered by circulating a Blue and White Book (blue and white were Argentina's national colors) that stressed the theme of Yankee imperialism. Postwar Economics The postwar boom enabled Peron to keep his coalition together. The export sector produced large surpluses in the balance of payments, making available funds for industrialization, mainly in labor-intensive manufactures. Between 1945 and 1948, real wages for industrial workers rose 20 percent. Personal consumption also rose. Since there was only a slight decline in the share of the national income that went to profits, the redistribution of income to the working class did not come at the expense of any other segment of the alliance. Industrialists kept profits up and benefited from increased domestic consumption, which provided a growing market for their products. The only sector of the economy that was slighted was agriculture. Peron managed to win over a considerable sector of the dependent middle class through his use of government patronage, just as Yrigoyen had done before. he kept the military happy by his commitment to industrialization, an important aspect of his desire for national self-sufficiency and by providing it with generous salaries and the latest equipment for modern warfare. One of Peron's greatest assets was his beautiful and stylish wife Eva Duarte de Peron, known affectionately by Argentines as "Evita," who acted as his liaison to the working class. Evita, a former dance hall girl and radio and movie star, headed a huge charitable network that dispensed tremendous amounts of money and patronage. So beloved was she that when she dies in 1952 at the age of thirty-two, Peron led a movement to get the Catholic Church to canonize her. The president's popularity with the working class suffered after her death. Evita strongly advocated women's suffrage, which was granted in 1947. Consequently, women supported Peron in large numbers. After 1948, however, the economic picture changed drastically. With the exception of a short-lived recovery during the Korean War (1950-1951), Argentina entered a period of severe recession, which included several drought-induced bad harvests. The late 1940s brought the first signs that Argentina would face serious long-term economic difficulties. Its export commodities began to confront increased competition from the United States and from revitalized Western European agriculture. later, the advent of the Common Market worsened Argentina's position. Balance of payments deficits replace the large surpluses that had financed the nation's import-substitution industrialization. Industrial production fell, as did per capita income. Real wages dropped 20 percent from the 1949 level in 1952-1953. It was in this decline that Peron's political failure was rooted. There are two schools of opinion regarding Peron's economic policy. The first, typified by the English scholar H.S. Ferns, is highly critical. According to this analysis, Peron's policies were disastrous in the long run. In the first place, he drained the export agricultural sector to the point where farmers had no incentive to expand acreage or modernize production. Farm production dropped precipitously (although this was in part due to bad weather during the early 1950s). Furthermore, higher real wages increased internal consumption of Argentine foodstuffs, thus lessening the amount of food commodities available for export. In addition, the critics hold that the major portion of government expenditures was ill- advised. Peron's economic policy revolved around two essential points: government intervention in the economy on a large scale and reestablishment of Argentine control of its own economy. The president nationalized the Central Bank, the railroads, the gas industry, much of the electric power industry, the merchant marine, and the air transport, insurance, and communications industries. The government controlled prices on consumer goods and rents. Mismanagement and corruption permeated these state enterprises, and this siphoned much of the utility and profits of these operations. The critics also claim that Peron paid inflated prices for these nationalized enterprises, leaving no money for capital improvements. The problem was especially acute with the state railroads, which desperately needed new equipment and repairs. But Peron had paid the British an enormous sum for the railroads and nothing left for improvements. In some cases, the Argentine government paid off bonds at par years ahead of maturity, although the bonds were selling on the stock exchanges for 60 to 70 percent of par, and they paid low interest. paying off such debts, it is claimed, was financial madness. A second school of opinion, led by Jorge Fodor, defends Peron. This analysis maintains that the dictator's maneuvering room was severely limited by world financial and market conditions, especially in Britain and the United States. Argentina's alternatives were governed by four crucial factors. First, much of the nation's export surplus was tied up in Great Britain and virtually unavailable, because Britain was in the midst of an economic crisis. Peron paid a high price for the railroads and perhaps some bonds because the British used the enormous sum of Argentine money locked in their country as a bargaining device. Second, the amount of Argentina's gains during the world was vastly exaggerated. It was true that Argentina received high prices for its farm commodities during and after the war, but theses prices were deceiving, for Argentina, through its trading monopoly, the Argentine Institute for Trade Promotion (IAPI), had to extend credit to enable Europe to buy its products. This meant that Peron did not have as much capital to spend as his critics have maintained. His money was tied up in England or on the Continent in credit. Third, even if Peron had possessed these huge sums, he had no place to spend them. He has been attacked for not sinking money into much needed public works, especially railroads and roads, and into heavy industry. The fact is, however, that neither England nor the Continent could supply these products, and the United States were unable and unwilling to supply them. Argentine neutrality during the war meant that the United States would not export capital goods and other industrial commodities to Argentina. Fourth, and finally, Argentina's own economic forecasts predicted that its future as an exporter of foodstuffs was bleak, given the economic condition of Europe and the specter of growing competition. Peron, therefore, acted rationally when he shortchanged agriculture in favor of industry. When the market conditions for agricultural exports improved, Peron put money into this sector. The critics appear to be on solid ground when they point to the enormous sums spent on the military and on impractical military schemes for industrial self-sufficiency, such as nuclear energy projects. Peron's defenders would underline that he had a very limited area for maneuver and did the best he could. Furthermore, many of Peron's moves were made to counteract or eliminate undue foreign influence in Argentina's economy. He nationalized the Central Bank, not only because he wanted to extend government control over fiscal policy, but because the Central Bank was controlled by foreign banks. The establishment of the IAPI was also designed to counteract foreign influence. During the war, the Allies established a joint purchasing agency; this meant that Argentina, in effect, had only one market for its products. The IAPI, the sole seller of the nation's commodities, had more bargaining power than individual producers could have had. It played an important role in the rise of Argentine industry through its monopoly on export cereals. Buying the cereals at low prices and selling them on the world market at high prices, it channeled the surplus into industrial development. But in the early 1950s, with world prices, the IAPI gradually lost its capacity for financing industry. Whatever one may think of Peron's economics, the fact remains that he solved none of the country's major economic problems. The main roadblocks remained. Transportation continued to be inadequate and obsolete, and a scarcity of electric power stood in the way of industrial modernization. Argentina did not produce enough fuel to meet domestic needs, and this created an enormous drain on the balance of payments. The nation's industry remained limited for the most part to import-substitution light industry. Despite his anti-imperialist rhetoric, Peron did not nationalize such key foreign-owned industries as meat packing and sugar refining. Most serious of all, Peron did nothing to break the hold of the latifundio on the land. As a result, agriculture was marked by inefficient land use, which impeded long range development. Peron's Downfall After his reelection in 1952 and in response to the economic crisis of the early 1950s, Peron formulated a new plan (the Second Five-Year Plan, 1953-1957) that, to a great extent, reversed his previous strategy. He tried to expand agricultural production by paying higher prices to farmers for their produce and by buying capital equipment for this sector (tractors and reapers). He sought to increase the agricultural production available for export by means of a wage freeze, which he hoped would restrict domestic consumption. Although real wages declined, workers did not suffer proportionately more than other groups. But the industrial bourgeoisie was unhappy, for labor productivity declined while the regime's prolabor policies propped up wages. The industrialists, supported by a considerable portion of the army, wanted deregulation of the economy so hey could push down wages. But the major problem of the industrial sector was lack of capital, since the agricultural sector no longer generated a large surplus. In order to solve the capital shortage, Peron abandoned his previously ultranationalistic stand and actively solicited foreign investment. In 1953 the government reached an agreement with a North American company, the Standard Oil Company of California, for exploration, drilling, refining, and distribution rights in Argentina. Peron hoped thereby to reduce the adverse effect oil purchases abroad had on the balance of payments. The following year, the government entered into a partnership with H.J. Kaiser, an American businessman, to produce automobiles. Argentina's aviation industry, a pet project of the military, was converted to auto production. Foreign capital used the most modern technology and machines, which required fewer workers and, therefore, tended to create unemployment in the affected industrial sectors. In order to maintain government expenditures and a bloated bureaucracy in the face of declining revenues, Peron printed more money. The amount in circulation increased from 6 to 45 billion pesos during his two terms. By 1954 he had had some success in stabilizing he economy; he achieved a balance of payments surplus, and capital accumulation showed an upward curve. But his new economic strategy had alienated key elements of his coalition of workers, industrialists, and the armed forces. Peron then sought to divert attention from economic issues with disastrous results. Peron adopted two new strategies. First, he attempted to enhance his moral and ideological appeal. Second, he began to employ greater coercion to suppress a growing opposition. The vehicle for his ideological and moral appeal was justcialismo, Peron ideal of justice for all--a third route to development that was neither communist nor capitalist. Peron's strategy included attacking the church. Starting in 1951, the new regime grew more repressive. The government suppressed and took over Argentina's most famous newspaper, La Prensa (1951). Further, Peron used his National Liberating Alliance, a private army of thugs, and the thirty-five-thousand-man federal police force to intimidate the political opposition. Torture, imprisonment, censorship, purges, and exile became the order of the day. After 1954, even the General Confederation of Labor became a coercive force, whose prime function seemed to be to suppress opposition within the labor movement. Peron's reluctance to go along with the industrialists' desire to push down wages and increase productivity alienated that group; the industrial bourgeoisie then joined forces with the agrarian interests, which had long and bitterly opposed Peron. This desertion ended Peron's once highly successful coalition. Inevitably, Peron's hold on the working class loosened as the wage freeze and inflation reduced the value of their wages. The death of Eva Peron in 1952 contributed to the deterioration in the relations between Peron and the working class. She had served as her husband's ambassador to the workers. With Evita (little Eva) no longer at the head of the Social Aid Foundation, a vast philanthropic organization that distributed food, clothing, and money to the needy, Peron's relations with labor did not go so smoothly. Despite economic adversity, Peon could not have been overthrown had not the military abandoned him. For the better part of a decade, he had masterfully balanced, divided, and bribed the military. Most of the senior officers owed his both their rank and their prosperity. The army was heavily involved in industrial production, and this provided an excellent means to become rich. In addition, to win its allegiance, Peron had showered the military with expensive military hardware and excellent wages. however, his relations with the armed forces began to disintegrate when he altered his economic policy to lessen emphasis on industrialization and self-sufficiency. On this score, his concession to Standard Oil in 1953 was the last straw for the nationalist military. The military was also affronted by the dictator's personal behavior (he had an affair with a teenage girl), and it objected to his virulent attacks on the Catholic church, a pillar of traditionalism, during 1954 and 1955. It also resented Peron's efforts to indoctrinate the military in the tenets of justicialismo. Thus, in struggling to extricate the nation from an economic quagmire, Peron undermined the multi-class coalition that da brought him to power and sustained him there. When the final successful revolt took place in September 1955, after a failure in June, enough of the working class was alienated to assure the military's success. Peron briefly threatened to arm his working class supporters, the descamisados (the shirtless ones), but instead fled into exile.
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