Inflation has added volatility to the alreadty turbulent environment created by a messy devaluation. It was the "asymetric" devaluation, unfair to most people and favorable to few, that validated the society's right to complain. The 2001-2002 cacerolazos were the result of many years of silence and economic recession, added to the restraints on money availability and ultimately confiscation of deposits (2,014 such manifestations between Dec '01 and March '02, as reported by Rosendo Fraga in www.nuevamayoria.com). But, as external favorable conditions became the wind beneath the economy's wings, and as opportune fiscal decisions taxed exports and restored fiscal health, the middle class returned silently to work.
Who remained behind? 3 groups mainly: the cartoneros, usually poor people picking up paper and cardboard and becoming part of the recycling chain; the piqueteros, a more extreme group of chronically-unemployed and semi-anarquists demanding state subsidies and usually unwilling to work, and a third group which appeared as the piqueteros lost their initial charme: trade unions. A more careful analysis might lead us to understand that trade-unions might well be ex-piqueteros or cartoneros, who now found a job and a new raison-d'etre. Others might have been there all along, waiting for the chance to re-claim the streets. However it may be, the truth of the matter is that 2005 saw more than 800 trade-union related claims, and 2006 close to 500. 90% of public manifestations cutting off roads came from groups other than piqueteros, who used to have monopoly of road-blocks.
The peso's devaluation and rising inflation gave unions the reasons they needed to make demands: workers need to recover purchasing power. In other words, we want increases above and beyond official inflation. This certainly created a problem for the government, also keen on keeping an eye on inflation in spite of its consumption-boosting, peso-flooding policies. As union leaders got closer to the government (Hugo Moyano, for instance, in photo below with President Kirchner), conflicts led to higher and more significant concessions in return for social peace. The government had promised business-owners that they would make money on larger quantities sold and not on higher prices, and having road-blocks and such certainly affected sales, so the government could not have that either. Also, as increases were negotiated with certain unions, others wanted the same or better conditions, which led to more manifestations. And, at the end of the day, white-collar workers alse needed rises to maintain basic relationships between white and blue collar salaries.
Companies are caught in the middle with higher labor costs and a rising demand for their products, at irrational prices sometimes. What to do? Increase prices, and face the government's anger (happened to Shell a few months ago). Do not increase prices and facec uneconomic results, even bankruptcy. The answer: a lot of creativity on behalf of businessmen and a lot of ingenuity from the government, thinking that they can fool all of the people all of the time.Power corrupts. Inflation helps to create the proper conditions for strikes, road-blocks, public protest and ultimately corruption of the culture of hard work and sacrifice.
