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which broke over the country attained its greatest intensity.
We find that in 1891 the expenditure authorised by the
national budget — not the expenditure actually effected, with
which we shall deal further on — amounted to |41,2o0,349
paper and |20,315,446 gold, or some 31 millions in gold, or
£6,200,000.

Five years later — in 1895 — this expenditure had increased
to $76,000,000 paper and $15,000,000 gold, or $37,000,000 in
gold, or £7,400,000. Since then, with rare exceptions, the
budgets have followed an ascending scale. If, indeed, we
concern ourselves with the sums actually realised, instead of
those proposed by the budgets, we find that the amounts of
the later budgets are these : in 1898, S75,OOO,O0O gold and
$119,000,000 paper, or $121,000,000 in gold, or £24,200,000 ;
in 1899, $31,000,000 gold and $104,000,000 paper, or
$77,000,000 in gold, or £15,400,000 ; in 1900, $24,000,000
gold and $105,000,000 paper, or $69,000,000 in gold, or
£13,800,000, Reducing to gold the sums estimated in paper,
we find that since 1901, that is, since the time when the
value of the currency was established on a fixed basis, the
following sums have been expended: in 1901, £14,200,000 ;
in 1902, £17,600,000; in 1903, £15,600,000; in 1904,
£17,200,000; in 1907, £20,200,000; in 1908, £20,200,000;
there has thus been a rapid progress.

The budget for 1909 amounts to $270,000,000 paper, or
£23,812,800. In this total are comprised two items : one of
15 millions of piastres in paper, value £1,320,000 ; the other
of 3 millions, or £264,000, which £.re set aside to meet the
expenses of the fetes of the first Centenary of the National



THE ARGENTINE BUDGET 297

;lt I Re volution. If we subtract these two items, which are
15 necessitated by extraordinary expenses, we find that the
II increase of the administrative expenditure over that of 1908
t< amounts to £1,760,000.

It I We ought here to remark that these figures do not inchide
D! ithe sums realised by the Government by means of the issue
of stock : a procedure which coustitutes an interesting
t : chapter of Argentine finance.

i- We see, from these data, that the increase of the national
}i expenditure is a constant, almost an inevitable factor,
SI i which occurs year by year in the Argentine administra-
;t tion. It now remains for us to inquire if unavoidable causes
i exist which force the State to spend without reflection, and,
t ,when funds are lacking, to contract loans which grievously
i I burden the future; or whether, on the contrary, we have
[. ,here a fault rooted in the soil of new countries which have
I no serious administrative traditions, and in which the spirit
» [of order and economy has not yet grown to the stature of a
, i national virtue. In the Argentine Republic the increase of
public expenditure responds to causes which differ from
those which are active in the countries of Europe; though
we do not say that the latter do not also exercise their
influence. A new country, inhabited by a sparsely-settled
population, in possession of a rich but desert territory, its
economic organism as yet barely developed, the Argentine
has not yet produced a class of men practised in and pre-
pared for practical administration. It is, on the contrary,
afflicted with undisciplined political parties, full of impatience
, and of ideas of progress which cannot be immediately realised.
lit is not surprising that in the Argentine the increase of
public expenditure responds to causes unlike those to be
observed in other States, which number the years of their
lives in centuries ; which enjoy perfected administrations,
I possess a large class of men prepared for the science of
government and finance, and whose needs, far from increasing,
tend to restrain such expenditure.

So, considering the question under its most general

aspect, we believe we shall not depart very far from the

, truth if we suggest, as the causes which produce the constant

increase of the Argentine budgets, the following facts :



298 THE ARGENTINE IN THE 20th CENTURY

(1) the increase of administrative requirements, caused by
the increase of the population ; (2) the increase of the public i 40
debt; (3) the depreciation of the currency until a recent 1 ^ las^*
period, and the increasing dearness of the necessities of life ; 'g0
(4) national and foreign wars (which causes now belong to jgito
history, and have happily ceased to exercise their influence iloii
in the Argentine); (5) the intervention of the State as ijjispi
manager or promoter of expensive public works; (6) the ' h
cost of an imperfect and expensive administrative machinery, \ \0i
and the wastefulness of the Government and of Congress ; 0i
(7) a lack of control in the handling of revenue and expendi- 0,
ture ; (8) increased military expenditure. Under this last \ tif
heading we may include the heavy expenses which the ii
Government has been forced to meet in order to maintain the ; mi
integrity of its frontier and to avoid a war with Chili. ; Ew
Between 1889 and 1903 it has employed for this purpose a
sum of £13,000,000.

A brief examination of each of these causes will suffice
to show that they have been truly presented, and will also
demonstrate the degree in which the phenomenon we are
studying exhibits itself.

The influence of the first factor is assured and indisput-
able ; it is enough to enounce it ; it will be admitted with-
out further criticism. The increase of the Argentine popula-
tion, although it is not precisely all that might be desired,
because it is not equally distributed, being larger on the
coast than in the interior, is none the less considerable. The
first national census of 1869 gave a population of 1,877,000
for the whole country; that of 1895 gave 4 millions; an
increase of more than 2,100,000, or of 48 per cent, per
annum.

Since 1895, although the Constitution orders a ten-yearly
census, no census has actually been taken. But according
to the most reliable calculations, the population of the
Argentine amounts at present to more than 6 millions of
inhabitants.

It is obvious that an increased population must also
mean an increased administrative expenditure, as more tele-
graphs are needed, more bridges, roads, and railways, a larger
police service, more lawyers and judges, and more schools



THE ARGENTINE BUDGET 299



I



nd teachers. No sensible person would pretend that the
;iational expenditure could remain unchanged, while all else
was developing and prospering. If the national revenue
increases at an extraordinary rate, on account of the develop-
ment of the population, it is only logical that the expenditure
should increase likewise ; but in a less proportion, it is true,
;s is proper under a good administration.

But this is not to say that it is permissible for adminis-
trators entrusted with the annual duty of presenting an
estimate of public expenditure to do what is occasionally
done, with such deplorable results — to estimate also in an
Exaggerated fashion the increase of the population, in order
all the more to inflate the budget. The profound financial
icrisis, which affected the country in 1890, had no other cause.
Everything is risked by the abuses of official expenditure.
jWe have the proof of this in the fact that the economic
'possibilities of the country have never been so great as in
these moments of financial crisis.

The continual increase of the public debt is another of
the causes of exaggerated budgets. Since the first loan of
£1,000,000, contracted by the Province of Buenos Ayres in
11822, which was later transferred to the account of the
ination, until the present time, when, if no new loans have
jbeen contracted, at least the Government has put into circula-
Ition millions of stock which it was holding in reserve, the
'public debt has done nothing but increase, and in con-
siderable proportions, attaining in 1^09 to an amount of
,-^371,000,000 gold and $237,000,000 paper, or £95,000,000 in
all ; and this, without including the last loan of £10,000,000
contracted by the Government in March 1909.

Another permanent cause of the increase of public ex-
Ipenditure is that which arises from the intervention of
the State, as guarantor or promoter of costly public
works.

The Argentine Constitution has very wisely instructed
Congress to " promote the introduction and the establishment
of various industries and of immigration ; the construction of
railways and navigable waterways; the colonisation of the
lands belonging to the nation, and the importation of foreign
capital and the exploitation of the rivers of the interior, by



300 THE ARGENTINE IN THE 20th CENTURY

means of protective laws, temporary concessions, privileges,
and awards, which shall be an incentive to emulation." I ^

In these sentences the writers were inspired only by the ■ fi
embryonic condition of the country for which they legislated. I j
In the old-established European nations, where great accumu-
lations of capital exist, where everything is done by personal
initiative, where the commercial and industrial spirit isj
highly developed, many of the prescriptions of the Argentine'
Constitution would be useless or out of date. But here,
where capital is only beginning to exist, as a result of the
large commercial balance left over from each year of inter-j
national trade ; here where, to use the phrase of an Argentine |
thinker, " we are naturally rich but economically poor," the i
State has to turn to all trades; it has to go into business as.
contractor, encourage the establishment of industries byj
means of premiums or bounties, and stimulate the introduc-
tion of capital and of immigrants.

The last of the causes we have cited as determining the
increase of public expenditure in the Argentine, is the
increase of military expenses. We do not here refer to
the extraordinary expenses which the Government had toil
support for a number of years, in order to acquire the
elements of naval and territorial defence wherewith to meet
the possible aggressions of a neighbouring State, but the
ordinary annual expenses for the upkeep of the army and
the navy.

Up to 1902 these expenses followed a scale of accelerated
increase, and the country met them as a necessary sacrifice,
dominated by the conviction that by this means it could
evade the greater calamities of a war ; and quieted at the
same time by the promises which were given that once the
danger had passed the expenses would naturally decrease.

Unhappily it was not so. Although the international
horizon was clear of the cloud which had threatened to
disturb the tranquillity of the country, the army and navy
estimates showed no signs of abatement ; on the contrary,
they showed a tendency to increase. Thus in 1902, when
the international question was in an acute stage, and a
rupture was momentarily expected, these estimates amounted
to £2,816,000.



THE ARGENTINE BUDGET 301

Now, in 1909, with peace and tranquillity roigiiinj^ on
all sides, the war-budget still amounts to £1,980,000, and
: the naval budget to £1,452,000 ; or to more than £3,400.000
> in all. We repeat that these are ordinary, not oxtra-
' ordinary budgets, whose amount is always considerable, and
' which have to be met by means of sums raised by special
' financial laws, or authorised by simple resolutions of the
: Cabinet or Council of Ministers.

■ To these military expenses we must add the sums
I required to pay the retiring gratuities of officers, and these
! already amount to a veritable army. These gratuities,
I granted under the provisions of an irrational law, have con-
! tributed to deprive the army of a large number of soldiers
• who niiofht still be serving with honour and distinction.
I But large as these expenses are, they are altogether

I eclipsed by the exorbitant sum of £14,920,000 voted by
1 Congress in 1908, which, divided into eight annuities, is
' destined for the purchase of munitions of war, ships, etc.

The Argentine, by consenting to such expenses, which
i are as excessive as they are unjustified, is thus deliberately
! entering upon the policy of armed peace, which has produced
such lamentable results among the nations of Europe.

I The figures we have already given, which relate to the
j National Budget, represent a portion only of the expenses
I which weigh upon the inhabitants of the country; for
I they do not include those amounts requisite for the support
i of the provincial and municipal administrations of the entire
1 Republic. The amount of all the budgets together — national,
provincial and municipal — amounted, in 1908, to £29,200,000.
Each one of the six-million inhabitants of the Argentine
must thus annually contribute nearly £5 towards the support
of the public administrations. But in reality this contribu-
tion is still heavier, as the expenses which figure in the
budget are only a part of the administrative expenses, and
we must still add the expenditure authorised by special laws
or resolutions of the Cabinet.

This proportion of £5 per inhabitant is enormous ; to
understand how large it is, we must compare it with the
amounts charged in other and more advanced countries. On
u



302 THE ARGENTINE IN THE 20th CENTURY

the other hand it is stated that some 30 per cent, of the
whole national expenditure is absorbed by the salaries of the
administrative employes, functionaries, ministers, etc., and
by pensions and retiring gratuities.

Commenting upon this abnormal situation, a sometime
Minister of Finance remarked some years ago, in an official
document which attracted attention by the energy and
sincerity with which it was written : —

" Our budgets have constantly increased of late years.
It is notorious that the personnel of the Administration is
excessive, just as it is notorious that useless and expensive
sinecures have been created, with the sole object of giving
places to persons whose influence has been such that the
State has undertaken to support them. Bureaucracy is in-
creasing; industry, commerce, and all the spheres of free
endeavour and of individual effort are abandoned by the sons
of the country, who seek salaried employment or the exercise
of intermediary professions which demand no effort. The
number of young men who waste their time in seeking a
place, instead of devoting their activities to work, in a
country which offers wealth to all who will employ a little
energy, a little perseverance, is surprising. But all want
an easy life, even though it be poor and without horizon ;
all wish to live on the budget, and in order to gain their
object they exhibit all kinds of ingenuity; the}^ go seeking
recommendations, and employ every means at their disposal.

" This host of pertinacious beggars of place results in the
creation of new employments and new services, all equally
useless. The national and provincial administrations pay
more than $65,000,000 in salaries and pensions. Each
inhabitant contributes six golden dollars — £1, 4s.— towards
the upkeep of an army of employes, which is an enormous
sum. The public services of other countries cost, per inhabi-
tant : in Switzerland, 4s. 9-6d. ; in the United States, 6s. 4-8d. ;
in England, 8s. 2-88d. ; in Holland, 9s. ; in Austria, lis. 2-88d. ;
in Belgium, 12s. 0-48d.; in Germany, 12s. 0'96d. ; in Italy,
15s. 9-6d.; and in France 19s. 2-88d. These figures, taken
from Paul Deschanel's work on Decentralisation, show us
that we have outstripped all other nations in the matter of
expenditure on the administration ; even France and Italy,






THE ARGENTINE BUDGET 303

where bureauracy is regarded as a calamity and as one of
the causes of their economic decadence.

" We must check this avalanche by suppressing all
useless employments and all superfluous services. It is
essential to turn our young men aside from tlieir present
path, in order that necessity shall force them to exercise
their energies in the vast field which is offered them by a
new country, full of natural wealth, with a fertile soil and
a benign climate." *

The reaction which Senor Rosa, in his genuine patriotism,
had hoped for, took place a little after his departure from the
Ministry of Finance; but unhappily its direction was the
reverse of that he anticipated.

We have examined the expenses of the public administra-
tions; we have measured the weight of the public debt; we
must now examine the treasury receipts, in order to discover
what are the most important sources of the revenues which
fill it, and what elasticity they possess.
I The Argentine Constituents, after having explained, in the

! sententious preamble which serves as a preface to their great
political code, what place was theirs who were building the
great edifice of the State, turned to consider from what
sources the revenues for the Treasury might be drawn, in
order to satisfy the necessities of the administration of the
country.

To this effect they enacted that these resources should

! be : " The taxes upon imports and exports ; the sale or

I allocation of lands forming part of the national territory ;

j the postal revenues, and the other taxes, which the General

Congress will impose equitably and in proportion to the

population ; also such loans and credit operations as the

same Congress shall decree for the urgent needs of the

nation, or for undertakings of national utility." (Article 4).

Has the foresight of the Constituents in establishing

these sources of revenue been justified ? or, in other words,

were the elements of revenue created by the fundamental

charter efficacious ? A little study of the system of Argentine

revenue will show that of all these sources enumerated,

i the only ones that have a permanent and fertile existence

* See Mimoiri's des Finances dc 1S80, by J. M. Rosa, Vol. II., p. 174.



306 THE ARGENTINE IN THE 20th CENTURY

Besides the resources furnished by the indirect imposts
of the customs, there has since 1891 existed in the Argentine
another kind of indirect internal duty, which is charged
upon consumption, and which every day acquires a greater
importance, in proportion as the country is developed and as
wealth and population increase.

These duties were established at a critical moment of the
country's history, and they mark a degree of evolution in
the financial system of the country. In 1891, when the
liquidation commenced of the great financial crisis which
had completely overturned the economic organisation of the
Argentine, the strength of the country was broken, the
Treasury was empty, and there existed a public debt which
was all the more grievous in that the paper currency was
absolutely inconvertible, and decreased in value daily, in the
midst of all the difficulties which characterised that terrible
time.*

This overwhelming situation resulted in the establishment
of indirect internal imposts ; that is, the branch of taxation
which is levied on the national industry and national produc-
tion ; but which is, in all contemporary nations, one of the
most fruitful sources of revenue ; the more so as its collection
demands few sacrifices on the part of those who pay it.

The realisation of this fortunate idea, which efiected an
important innovation in the revenue system, was due to the
administration of Senor Carlos Pellegrini, in which Vincent-
Fidel Lopez was Minister of Finance, and was perhaps the
most important and meritorious act of the administration.

During this first year of 1891, the receipts furnished by
this branch of taxation did not attain to the expected results ;
they amounted only to £224,682, distributed as follows:
Alcohols, £123,511; beer, £23,549; matches, £76,617; banks
and companies, £982 ; total, £224,660. Out of a total collec-
tion of $75,501,077 paper and $497,120 gold, or £6,743,518,
the yield of internal duties amounted only to 3'29 per cent.
Four years later, after the administration of internal duties
had undergone considerable modifications and improvements,
so that the system of collection had become more exact, these
imposts furnished the Treasury with £676,946, which out of

* See Memoria del Ministerio de Hacienda, 1890, p. 72.



THE ARGENTINE BUDGET 307

a total collection of $29,805,651 in gold and |2S,958,460 in
paper, or £11,571,076, amounted to 585 per cent, of the
whole.

In 1897 the budget voted by Congress increased the
general revenue to be collected to $33,492,000 in gold and
117,835,000 in paper (deducting from this last sum 12 millions
of paper produced by the shares of the National Bank and
2 millions as the profits of the Bank of the Nation), or in all
Sl48,000,000, The yield of internal duties had increased to
819,360,000, or 13 per cent, of the whole revenue.

In 1908 the domestic imposts produced £4,000,000, or 17
per cent, of a total collection of £22,400,000. The chief element
of this revenue was furnished by the duty on the consumption
of alcohol, which produced £1,496,000. The tobacco duty
came second with a yield of £1,760,000. Matches yielded
£269,000; beer, £308,000 ; insurances, £61,600. These figures
sliow how rapid has been the increase of the revenue from
internal duties on consumption.

If we disregard that portion of the revenue which is
raised by imposts, and examine the yield of the industrial
undertakings exploited by the nation, we shall find that as
yet they are far from constituting any real resource for the
Treasury, and far from compensating the large amounts of
capital employed. Comparing the yield of these undertakings
with the working expenses, we find that the balance, as a
general thing, is on the losing side.

This is the case with the four railways belonging to the
nation, whose yield, in 1905, was £1,012,000. The working
expenses, the renewal of rolling-stock, and repairs of the per-
manent way, completely absorbed the revenue. We must
hope that this ruinous state of things will disappear presently,
when the network of State railways is completed, and the
lines unite important centres of production, and the system
of administration is perfected.

After this miserable result we may point with relative
satisfaction to another important industrial undertaking of
the Government : the sanitation works of the city of Buenos
Ayres. Apart from the hygienic advantage, which is already
very evident, the financial results are worthy of attention, as
they show that this undertaking will very shortly cover, if



308 THE ARGENTINE TN THE 20th CENTURY

not the whole, at least a portion of the interest on the capital
employed.

The ordinary working expenses of this undertaking
amounted in 1908 to £258,202, while the revenue amounted
to £673,200. This left a balance in favour of the Treasury
of £415,000, of which a great part was employed, by virtue
of special laws, in the enlargement of these works, which
enlargement will still further increase the revenue. The
financial result of this undertaking is a conclusive proof that
such euterprises, when directed with method and intelligence,
are always profitable to the State.

The Postal Service, which the authors of the Constitution
expected to be a considerable resource, has hitherto given
only negative results ; the receipts have not hitherto covered
the working expenses. The ordinary expenses of the Depart-
ment of Posts and Telegraphs were £1,144,000 in 1908, while
the efiective receipts for the same year' were only £936,820;
giving a deficit of £207,680. In reality this deficit was far
greater, because fresh expenditure was necessitated by the
construction and repairs of telegraphic lines, and certain
purely nominal receipts, arising from the franking of ofiicial
correspondence, were put on the credit account.

If we now proceed to examine the revenue derived from
the national estates, we find that its most important item pro-
ceeds from the sale and allocation of the public lands. This
revenue, which figures among those enumerated by the funda-
mental charter as forming the resources of the Treasury, has
by no means produced what it should, owing to the lack of
method or foresight in the management of this important
administrative department. In 1908 this source produced i
only £278,080 ; and this sum represents a considerable increase (
over previous years, especially over the year 1904, when the j
revenue was only £27,368. But when we take the fact into j
account that the nation still possesses 212 millions of acres j
of land, which are situated in territories whose population is
rapidly increasing, and which will shortly be well served with {



Online LibraryAlberto B MartínezThe Argentine in the twentieth century [microform] → online text (page 26 of 33)