The 100 whys of poverty in Argentina: and the solution

Why do we have inflation?

because we broadcast

Why do we broadcast?

Because we have a fiscal deficit and we cannot impose more taxes, since they are already very high.

Why do we have a fiscal deficit?

Because the state spends a lot.

Why do you spend so much?

Because, due to high unemployment, it must employ people in the State, favoring early retirement, subsidizing those who have little or no income and, due to poverty and the resulting growing precariousness of employment, spend more and more on education, health and security public.

Why is poverty growing in Argentina?

Because fewer and fewer companies offer jobs and products, which lowers wages and raises prices—private wages are averaged with public wages and subsidies, which are financed by taxes on labor and products; those, finally, are always transferred to prices.

Why are the prices so high?

Because there are few companies, the competition is low; Since taxes are so high to maintain the State that spends, the tax component of prices is increasing, diminishing the incentive to invest; As there is rising inflation that makes it difficult to calculate costs, small companies increase prices using the value of the dollar as a reference —they do not have the administrative capacity or time to calculate costs in any other way.

Why are wages falling?

Because there are few companies that want to employ staff, and the few that do, must pay taxes so that the State can pay for the growing number of employees, retirees and subsidies. This makes salaries in the private sector the adjustment variable, giving rise to the paradox that today, on average, they are lower than those in the public sector —which lives on the added value generated by companies and people in the private sector.

Why is the economically active population working in the private sector so low?

Because due to the higher salaries in the public sector, the impossibility of layoffs and the lower requirements in terms of education and effort, it is difficult for anyone who can get a job in the State to go to the private sector.

Why do companies have few profits?

Because an important part of what is collected from sales goes to the State in the form of taxes, many of which are on the work of the people employed, forming part of the cost of production; also due to lack of demand, a product of growing poverty —in addition to the high shortage from year to year, which prevents maintaining a healthy strategy over time.

Why are production costs so high?

Because in addition to the taxes that make the personnel who work in the company expensive —which is used to pay employees, retirees, subsidized and the expenses that general poverty causes and incurs to the State—, the productivity of the companies is low due to lack of of capitalization. To this we must add the costs of fines and lawyers, generated by the high degree of litigation in our country.

Why is the productivity of companies low?

It is mainly due to three phenomena: the first, a low and bad work environment; the second, a very low capitalization of the companies; third, which is what removes international competitiveness, is that what is produced by companies must feed an ever-growing population that works in the public sector —or does not work—, making the products consumed by their workers expensive.

Why is the work environment bad?

Because, due to financial incentives, employees with alternatives to their current job generate conflicts to be fired and take their severance pay home — which would not apply if they voluntarily left the company. And because, in moments of crisis when employers do not have financial liquidity, they fire with just cause although they will not have it (strictly speaking, there is always just cause, but the law does not contemplate it that way and requires compensation). To this we must add that there are indecent labor lawyers who promote the conflict to swell the amounts and charge up to 40% of what is obtained by the employee (many times, much more) — they hold the employer prisoner with the threat that they will drop the labor lawsuits that it has in its portfolio and that, if it does not continue, the company will have to close due to the accumulated cases and amounts.

Why do people sue the companies where they work, if they already have a place to work?

Because considering that compensation is a right that falls to them —whether they are fired or not— and the amounts involved are too tempting.

Why are these judgments so big and damaging?

Many times the amounts, originally, are not very large, but when the lawyers intervene, they advise the employee with tricks that skyrocket the value of the fines —such draconian and erroneous legislation encourages an honest person to behave dishonestly.

Why are companies in Argentina so financially weak?

Because Argentine companies accumulate labor liabilities over the years, over time they are worth nothing. The businessman knows this since the formation of the company, which forces him to take out what he believes corresponds to him in the form of dividends from the beginning, since that money is all he will get from the company over time.

Why is he taking money from you as dividends?

Because as the value of the companies will ultimately be zero due to labor liabilities, when you go to the bank for reasons of growth or financial needs, they will ask you for personal guarantees to ensure payment if necessary.

Why do you ask the bank for personal guarantees?

Argentine law indicates that in a bankruptcy or bankruptcy, employees collect their debts before the bank and creditors —it is a way for shareholders to maintain security reserves.

Why is the level of loans to companies in Argentina so low?

Because neither do banks want to take the risk of fragile companies, nor do businessmen want to risk their family assets by giving personal guarantees.

Where do those dividends that businessmen get go?

These dividends are defined in dollars that finance the American government and are kept locally or sent abroad—what is called a capital outflow.

Why does the dollar rise, if businessmen have many in their portfolio?

The flow abroad is continuous due to official and unofficial dividends. Also because, since internal prices are high due to the direct component of taxes above 50%, it is difficult to export products that could perfectly be manufactured locally at low costs. Thus, they end up being imported at lower prices than those manufactured locally, making the trade balance deficit. This, added to the phenomenon of capital outflows and exacerbated by inflation and the growing fragility of the system, is reflected in the Country Risk index —which accelerates capital outflows, feeding back the rise in prices and with it the increase in poverty and despair. All this means that businessmen do not want to bring foreign currency to the country —unfortunately, in decline—, even knowing that there are interesting opportunities, given that properties and other goods are very cheap in relation to other places in the world. In short, considering that what they have locally is already enough risk.

Why is the prestige of the leadership so low?

Because politicians in this system continually have financial and commercial deficits that show their inability to change the reality of citizens; because businessmen show our incapacity by not being able to generate employment, pay increasingly lower wages and live in a society with increasingly poor people; because unionists continually lose members, since they receive lower salaries and benefits —and because there are fewer and fewer white employees; because justice receives contempt from employees and society, since the courts are saturated and take time to rule — meanwhile, employers despise it because they feel that the judges do not understand the situation and are deceived by a few lawyers who have made fortunes with the trial industry; because bankers do not give credit to companies or employees and live by lending money to the State, which by paying that interest is more exposed to the deficit. Education, health and public safety have also lost prestige and those who direct these entities, for having to treat a growing population with decreasing resources, as well as the administrators of the ANSES, since there is not enough money to maintain to so many destitute people and retirees.

Finally, the public employee has also lost prestige: the few good ones are surrounded by many who do nothing. The private employee has also lost it, because due to the number of lawsuits that employers suffer, they look for ways to grow as little employment as possible — they are afraid to hire because of the risk involved in incorporating someone who might make an improper judgment (reverse lottery).

Who has taken advantage of this?

From the leadership, two sectors mainly. On the one hand, the unionists who represent the most unproductive sector of society, public employees, who today earn more than private ones, have been taking power —this continues to increase, since the laws make it impossible to fire in the State.

The second sector of leaders is the one that represents the sectors that do not work and hold the rest of the Argentines hostage, especially those of the AMBA.

Also, in the private sector, you have to count some immoral labor lawyers.

Where does the power that these sectors have come from?

Power comes to them due to the high unemployment not reflected in the numbers, because in our country public employment, those who receive some type of plan and those who do not look for a job because the wages are so low that it is not convenient for them to look for it, do not count as unemployed.

Another reason for their power is found in the large volume of money they handle, contributed by those of us who suffer the consequences of their actions —that is, the rest of society.

What is the solution?

It is not devaluing or revaluing.

It is not the low rates nor the high rates.

It’s not giving away money.

It is not borrowing.

They are not price controls.

It is not closing the BCRA.

It is not firing 2.5 million public employees

The real solution is to lower the demand for public spending.

How do you lower the demand for public spending?

Generating employment in the private sector.

How is employment created in the private sector under the current conditions in Argentina?

It can only be done by complying with what the National Constitution establishes and giving more benefits to the worker; labor relations must be modified, eliminating the distinction between dismissal and voluntary abandonment of work.

How can the above be done at a minimum cost that implies savings for the State and reverse the continuous decline of an increasingly poor Argentina?

It can be done with insurance paid by employers to the State —which is the one who will receive all the positive externalities, such as less pressure to employ, fewer retirees who show up every year, and fewer people who can only live if they subsidizes them— that assures the worker that his family will have the benefit of the indemnity, regardless of the financial state of the company.

What is this project called?

“Mochila Argentina” and you can download the book of where the benefits for society, workers, employers, trade unionists and the State are detailed.

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