I’ll cry for you Argentina

PARK HYUN-YOUNG
The author is the head of the global economic team of the JoongAng Ilbo.

Civil servants protest against layoffs in Argentina on Sept. 5. [REUTERS]

Argentina is going through an economic crisis and is struggling with demonstrations. These protests are organized by various groups, including workers in the private sector and teachers, but more than half are by civil servants. Among the 462 protests in the 12 months from June 2017, 54.9 percent were staged by public workers. When the country was in trouble, civil servants protested the most.

On Sept. 5, workers at national and public medical centers surrounded the Ministry of Health building. They were protesting against decisions to reduce the Labor Ministry’s status and integrate the Health Ministry into the Welfare Ministry. The faces of protestors in foreign media seemed calm and some were smiling. Educators were also on the street. In August they had a 72-hour strike and demanded a 24 percent wage increase. The professors’ union demanded a 30 percent increase. The government wanted a 15 percent increase but settled at 25 percent.

They oppose the government’s austerity programs. Argentina’s economy began to decline at the beginning of the year. Inflation rose by 40 percent and the value of the peso dropped by 40 percent. The central bank raised the interest rate to 45 percent and again to 60 percent, but could not prevent money from leaving. In the end, Argentina asked the International Monetary Fund for a $50 billion rescue package. In return, Argentina promised reduced fiscal spending and a government agency reshuffle. The work to reduce 19 ministries to 11 has begun.

Tight fiscal policy was an inevitable choice, but the civil servants who know this were the first to protest. One third of the Argentine population is in poverty. Civil servants who are in a better situation became the biggest obstacle to restructuring.

The power of a strike comes from the number of participants. According to the OECD, Argentina spends 12.5 percent of its GDP on wages in the public sector. The number of civil servants increased by 70 percent between 2001 and 2014. Public servants make up 26 percent of the entire working population. Since the 2001 financial crisis, Argentina has added public workers to create jobs.

Once the number of civil servants grows, it is hard to stop. As they have the budget and information, they are good at justifying their increase. A more adverse effect is the risk of contracting the private sector. As adding civil servants means reinforcing regulation, the playground for the private sector becomes smaller. More whistles are blown. The harder civil servants work, the harder it is for the private sector, especially when jobs are increased with tax money.

In no time Korea will be like Argentina if public jobs increase without expanding private employment.

JoongAng Ilbo, Sept. 12, Page 34