Volume 43 | Number 3

Clientelism in Argentina:  Piqueteros and Relief Payment Plans for the Unemployed—Misunderstanding the Role of Civil Society

by Ramiro Salvochea

Abstract

Most Latin American countries have overcome military disruptions and are now well-established democracies.  Nevertheless, electoral continuity and fairness is not enough to guarantee that democratic institutions function properly and fairly.  A simple inquiry reveals the region’s entrenchment of corrupt governments, the growth of inequality, and the deepening of poverty and unemployment.  Argentina is no exception.
Many authors have argued that civic engagement will solve the struggles new Latin American democracies are undergoing.  In particular, it has been suggested that the activities of NGOs will lead inexorably to a better democracy.  And, without a doubt, civil society’s role is fundamental for improving government accountability and strengthening the rule of law.
This paper, however, analyzes certain welfare practices currently in place in Argentina as an example of civil society actors being overinvolved in public affairs.  I show how their overinvolvement can neutralize the potential for accountability, particularly in analyzing the case of a civil society group known as the “piqueteros.” Specifically, improper delegation of authority over certain, widely extended unemployment welfare benefits has led to inadequate interaction between the State and this group.
NGOs have played an invaluable role as “watchdogs” of civil society.  It is clear that problems (such as the one described above) involve only a few of these non-governmental organizations.  But sometimes—as the example indicates—too much involvement, especially when extended to what I call management activities, can generate improper incentives and destroy the potential advantages of action by NGOs.  Furthermore, the overutilization of these actors in developing countries sometimes turns them into disruptive forces against democracy, and creates mechanisms that undermine economic growth and social development.

Summary

  1. Introduction
  2. The Rise of Democracy and Welfarism in Argentina Prior to 1983
  3. The Reestablishment of Democracy and Welfarism Since 1983
    1. First Crisis: Alfonsin's Hyperinflation
    2. Second Crisis: De la Rúa’s Resignation
  4. The Threat to Democracy: "Piqueteros," The Political Mercenaries, and the State Clientelistic Practices with Social Plans
    1. The Rise of Poverty and Inequality: The Palliative Solution of the PJJHD
    2. The Clientelistic Utilization of Social Plans: The Piquetero Movement
      1. The Piquetero Movement
      2. Allocation of Social Plans to the Piquetero Movement
    3. Black and White of the Piquetero Organizations
  5. Is This an Example of the Failure of Civil Society Actors?
    1. Introduction to the Problem
    2. Socioeconomic Requirements for a Functional Third Sector
    3. The Failure of Self-Selection in the Developing Countries: Its Failure in Argentina
    4. Proposals for Reform
      1. Is Increased Transparency a Proper Solution?
      2. Accountability, Not Direct Participation
      3. How to Solve the "Piquetero Problem"
  6. Conclusions on the Participation of NGOs in Welfare Policy
  7. Final Words

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It is a working day like any other in the City of Buenos Aires.  Parked buses line one of the flanks of 9 de Julio Avenue.  In the center of the avenue, hundreds of people are concentrated, holding signs and flags that identify them with their respective organizations.  Small groups surround their leaders and wait to be called upon to confirm their attendance.  Men and women, old and young, even children and mothers pushing baby strollers, patiently wait their turns to start marching towards the Pink House (where the president is).  Or maybe today’s destination is the Congress or the Ministry of Labor.  It does not really matter any more.

Most of the people present receive some government relief—what they call the “plans”—for being unemployed.  They are supposed to be working in return, but there is no work for them to do.  Instead they are asked to participate in protests.  People who are hungry and destitute but do not have one of these plans hope to get one.  To do so, they know they have to demonstrate their faithful commitment to the cause.  Participation in the protests is crucial.  There is nothing better to do, anyway—they have no jobs to attend.  For the younger ones, their schools will not provide any food for the day; in any case, they wouldn’t want to miss the thrill of being part of “the people.”

A man in a suit and tie walks by, keeping a respectful distance and stealing glances at the columns of people.  In his hand is a suitcase full of papers; in his eyes, a mix of fear, pity, and fatigue.  In the center of the Avenue, under the shadow of the “obelisco” monument, a dark column of strong black smoke rises.  The stink of burned tires surrounds the city.  There is no traffic and the silence is consumed by the chants of protesters that have slowly started to march to the rhythm of the violent and monotonous bang of the drums.  At the front of the column, a line of men marches in a military fashion.  They have their faces covered with black handkerchiefs and they hold menacing canes painted with the desire to strike frustration away.

The cars, stopped at various intersections, patiently wait for the column to pass.  The police loosely hold the line of waiting cars going nowhere.  This is nothing new.  It is a day like any other working day in Buenos Aires.1

I. Introduction

Most Latin American countries have overcome military disruptions and are now well-established democracies.  Nevertheless, electoral continuity and fairness are not enough to guarantee that democratic institutions function properly and fairly.  A simple inquiry into the region’s situation reveals the entrenchment of corrupt governments, the growth of inequality, and the deepening poverty and unemployment.  This is also the case in Argentina.

Many authors have argued that civic engagement is the solution to the profound crisis the new Latin American democracies are undergoing.  It has been suggested that the activity of nongovernmental organizations (“NGOs”)2 leads inexorably to a better democracy and “to the creation of a vibrant and participatory civil society in which all groups, including the poor and dispossessed, play an active role.”3 It has also been argued that NGOs have the advantage of a “close proximity to the poor.”4 In effect, the continuous activity of NGOs inevitably draws members into participatory practices, thereby reinforcing democracy.  Supporters claim that NGOs hold a key role in the process of reforming democratic institutions, as they identify the needs of, and serve as a voice for, the public.5 Some scholars characterize NGOs as “manifestations” of the community where they are rooted.6 Civil society organizations are similarly described by some as the expression of the concentrated exercise of political rights by members of society.7 These individual voices, concentrated in a gigantic public megaphone, gain enough power to be heard in the spheres of the government and other social actors.

The global influence of NGOs is growing exponentially.  NGOs registered in the Organization of Economic Cooperation and Development (“OECD”) countries almost doubled between 1980 and 1993, rising from 1,600 to 2,970 during that time.8 Similarly, spending by these groups over the same time period increased from $2.8 billion to $5.7 billion.9 A United Nations report estimated that by 1995 the number of international NGOs was nearly 29,000, while The Economist estimated that in the year 2000 there were two million of these groups in the United States alone.10 Similar growth rates are reported in the developing world:  Debora Spar and James Dail have identified that in Nepal, for example, the number of registered NGOs rose from 220 in 1990 to 1,210 in 1993, and in Kenya a reported 240 NGOs are created every year.11

Without a doubt, civil society’s role is fundamental in improving government accountability and strengthening the rule of law.  The example described in this paper, however, shows a situation where civil society actors have failed to show the miraculous positive effects normally attributed to them.  In fact, it illustrates important negative effects generated by the involvement of these organizations.

In particular, this paper analyzes certain welfare practices currently in place in Argentina as an example of overinvolvement of civil society actors in public affairs.  It is hoped this analysis will show how these welfare practices neutralize the potential for holding NGOs accountable.  In effect, this paper will describe the manner in which improper allocation of the management of certain unemployment welfare benefits has diminished the opportunities for positive interaction between the state and a particular civil society group known as the “piqueteros” (an association of various groups of unemployed people).  This description will explain how these civil society groups have been politically manipulated through the exchange of unemployment benefits for political favors.  The situation in Argentina illustrates how opening up opportunities for manipulation of funding sources can undermine the impartiality of civil society actors and generate an enormous incentive for corrupt practices.

But situations like the one described in this paper do not imply that the hope placed in the role of civil society is an empty one.  Particularly in developing countries, NGOs have played an invaluable role in acting as the watchdogs of civil society, alerting others when governments go beyond the limits imposed by law.  They have proven useful for defending human rights and achieving further governmental accountability, acting as instruments of relief for the problems of minorities.  It is clear that problems, such as the one examined here, involve only a few NGOs.  The valuable role of NGOs in society cannot be disputed.  But specific measures should be taken to ensure they can properly carry out their role.  Otherwise, NGOs can become an incredibly powerful instrument of corruption.

It will also be argued that the utilization of NGOs is not always the best choice—these organizations do not provide a magic solution.  The manipulation of social benefits in Argentina through the use of NGOs, like the piquetero organizations, shows the importance of respecting certain limits.  Sometimes, too much involvement, especially when extended to “management activities,” can generate improper incentives and destroy the potential advantages of action by NGOs.  In these cases, NGO involvement should not be taken further than the role of guardian.  Furthermore, the overutilization of these actors in developing countries sometimes works against democracy and creates mechanisms that undermine economic growth and social development.  I will try to explain the reasons for these failures and offer some proposals that would help avoid this deviation from the NGOs’ proper role in the future.

Sections II and III of this paper analyze the sociopolitical environment in Argentina in order to set the context of the current piqueteros phenomenon.  The first section covers the period from the beginnings of the nation to the return of democracy in 1983.  The second section covers the period from 1983 to the present.  The purpose of the historical description is to show how Argentina laboriously returned to a democratic regime in the 1980s, and to present the current socioeconomic situation of its population.  The data provided show the reestablishment of democratic rule has not provided prosperity and social equality.  In fact, the socioeconomic picture has deteriorated profoundly under the democratic regime.

Section IV explains how the piquetero movement became the massive force it is today.  This section also discusses how the piqueteros came to manage a number of unemployment benefits, and how this situation neutralizes and corrupts the performance of these civil society actors.

Section V tries to provide some answers to the question of how civil society actors, like the piquetero movement, could fail in their role as democratic enhancers and otherwise become involved in clientelistic12 and corrupt practices.  It will be argued that this improper involvement in welfare policies could be an additional factor in the decline of the national psyche.  I conclude with some generic proposals to shift the current incentives in the right direction.
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II. The Rise of Democracy and Welfarism in Argentia Prior to 1983

This first section is intended to provide some historical explanation of the phenomenon that will be described in the following sections, and gives a summary of the history of Argentina since its independence.

Argentina, a former Spanish colony, severed its bond with the Spanish Crown on July 9, 1816, when a party of separatists declared the country’s independence.13 A bloody civil war followed, with many coups by regional, social, or political factions.  Rule by the strong man, the caudillo, alternated with periods of a weak centralized government, often beset by disorder.14 Hence, the election of Bernardino Rivadavia as the first president of the Republic in 1826 did not really mark the beginning of democratic rule in the modern sense.15 Rather, the dominant political group at the time controlled the election of governmental officers.  Yet a profound division still existed between the Unitarians, who favored centralization of power in Buenos Aires, and the Federalists, who resented the oligarchy of Buenos Aires and were backed by autocratic caudillos with gaucho troops.16

In 1852, victory in the Battle of Caseros by General Justo José de Urquiza over Juan Manuel de Rosas (a caudillo who had taken the leadership of the country and governed with a very strong hand for more than 20 years) put an end to the conflict.17 Urquiza called a constituent assembly that adopted a constitution in 1853 based on the liberal principles enunciated by Juan Bautista Alberdi, and that had its roots in the U.S. Constitution.18 This constitution established a federal and presidential republic with a bicameral congress.19

By the beginning of the twentieth century Argentina had become one of the richest countries in the world, and its population had been boosted by the arrival of millions of Europeans. 20 Argentinean democracy, nevertheless, was weak.  Voting rights were the privilege of an elitist minority, and electoral fraud was common.21 President Roque Saenz Peña introduced an important electoral reform in 1912 making male voting a “universal, secret, and mandatory” right.22

After the relatively stable democratic period from 1852 to 1930, democracy was disrupted by a military coup by General José Felix Uriburu.23 This coup initiated a long period of political and social instability.24 In the midst of this period of instability, Juan Domingo Perón rose to political prominence, ultimately becoming one of Argentina’s most well-known leaders.  Perón gained popularity among the working sector by favoring the growth of labor unions and increased wages.25 The strong popular support for these policies propelled him to victory in the 1946 presidential election.26

During Perón’s first two administrations (1946–1955), the Peronists expanded state spending and committed to a dramatic redistribution of wealth through social policy and labor market regulations.27 Perón’s wife, Eva (later called “Evita”) soon became a champion of social welfare programs.28 Perón led a populist government under the flag of wealth redistribution, which was one of the main factors in the economy’s deterioration.29

The Peronist movement used the idea of a welfare state with the declared purpose of guaranteeing universal civil rights as an instrument of partisan propaganda.30 Notwithstanding the propaganda, this welfare movement, conducted by Eva Perón, was not clientelistic.31 With an evident electoral interest in winning over the lowest classes under the slogan “Perón cumple, Evita dignifica,” the Eva Perón Foundation indiscriminately poured public money—plentiful at that moment—over the less-favored.32

Perón, especially during his first two governments, relied heavily on the use of labor unions to mobilize this section of society.  For the individuals that remained outside the system, the Eva Perón Foundation practiced direct welfare.33 Its practices were defined as an “expression of solidarity between the working class and the ones that do not work.”34 Indeed, David Rock argues that once President Perón had won over the unions, Eva Perón created lines of communication between the highest and lowest strata of society.35 In any case, Eva’s charity practices (executed through the Foundation) were always inspired by the same end:  she exchanged favors and economic benefits for direct electoral support and loyalty.36 This scheme reproduced some of the typical features of classical welfare strategies:  discontinuity among different groups, a targeted population diffusedly defined as “poor,” asymmetry in donor-donee relationships, donor discretion in distributions, and the entrenched dependence of the donees.37

As the country’s economic outlook worsened, Perón became increasingly autocratic.38 His regime became marked by curtailments of the freedom of speech, imprisonment of political opponents, electoral fraud, and a general transition to a one-party state.39 In 1946, Perón established the Peronista political party, which was to become a central actor in the political arena.40 In 1949, the Constitution of 1853 was replaced by one that permitted Perón to be reelected.41 Finally, in 1955, Perón was ousted by his disillusioned armed forces and forced into exile.42

The interim military government of General Pedro Aramburu, facing a divided society, attempted to rid the country of Peronism, although he continued the bureaucratic, centralized practices established by Peronism with regard to welfare policy.43 Interestingly, until the 1960s and 1970s both democratic and military governments showed a tendency to decentralize these practices from the federal government to the provinces.44 Aramburu was replaced in 1958 when Arturo Frondizi was elected president.45 Frondizi began undertaking a program of austerity to “stabilize” the economy and check inflation, but his program was prematurely truncated when he fell into disfavor with the military.46 Frondizi was overthrown in 1962 and José María Guido, as leader of the Senate, assumed the presidency.47 New elections were held in 1963, in which both Peronist and Communist parties were banned, resulting in the election of Arturo Illia, a radical.48 Illia faced a serious economic depression and he recognized the necessity of reintegrating the Peronist forces into Argentine political life.49

In 1966, a junta of military leaders, unwilling to tolerate another resurgence of Peronism, seized power and installed General Juan Carlos Onganía in the presidency.50 The new government dissolved the legislature and banned all political parties.51 Widespread opposition to the rigid rule of the Onganía regime grew, and the military deposed him in 1970 and named General Roberto M. Levingston president.52 Economic problems and increased terrorist activities, however, caused General Alejandro Lanusse (the leader of the coup against Onganía) to dismiss Levingston in 1971 and initiate an active program for economic growth, distribution of wealth, and political stability.53 He conducted direct negotiations with Juan Perón and called for national elections.54

Perón was again elected president in September 1973, with his third wife, Isabel Martínez de Perón, serving as vice president.55 When President Perón died in July 1974, his widow succeeded him, despite having no prior political experience.56 Her government faced economic troubles, labor unrest, political violence, and deep divisions within the Peronist party.57 Moreover, Marxist revolutionaries were engaged in a bloody guerrilla campaign during her time in office.58

Isabelita, living in the shadow of Evita, never won over the hearts of the people, and a military junta led by Jorge Rafael Videla deposed her in 1976, installing Videla as president until 1981.59 During this time, the government suspended political and trade union activity, dissolved the congress, made alterations to the constitution, and replaced most government officials.60 The army then embarked upon a violent war against subversion.61

In 1981, General Roberto Viola succeeded Videla as president, but before the year ended General Leopoldo Galtieri replaced Viola.62 These changes were decided unilaterally by the members of the junta—no elections were held.63 In 1982, however, the failure of the ill-fated invasion of the Malvinas Islands (Falkland Islands) forced Galtieri’s resignation.64 Lieutenant General Bignone then succeeded Galtieri in office and quickly called for elections, leading to the victory of the radical leader Raul Alfonsin in October 1983.65
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III. The Reestablishment of Democracy and Welfarism Since 1983

Since 1930, as more fully described in the previous section, Argentina suffered military coups in 1943, 1955, 1962, 1966 and 1976.66 As a result, in the half-century following 1930, only one civilian elected as president served out a full term in office.67 Argentina swung from civilian to military rule, and from radical to conservative policies, and economic stagnation closely followed this political instability.68 As the problems of inequality and poverty became more acute during these years69, both the federal and the state governments steadily raised social welfare expenditures and increasingly used welfare policy as a political tool.70 The Peronists were arguably the first Argentinean movement to politicize the idea of a welfare state whose declared purpose was to guarantee universal civil rights while actually using the issue as an instrument of partisan propaganda.  But President Juan Perón’s welfare movement, conducted by Eva Perón, was universal, not clientelistic.  This paper will show how this circumstance rapidly changed with the return of democracy.

The return to democracy in 1983 marked the beginning of a period of democratic stability with competitive elections and effective power alternations in the national executive.  Furthermore, in 1989 and 2001 the country’s democratic institutions successfully weathered two deep crises.

A. First Crisis:  Alfonsin’s Hyperinflation

Under Alfonsin’s rule, starting in 1983, the economy deteriorated and the rise of poverty and social discontent forced the new democratic government to change its strategy on welfare.  Welfare became less universal as the government’s efforts became directed increasingly towards particular groups among the population.71

By May, 1989 the socioeconomic situation had become intolerable.  Hyperinflation gripped the country and citizens began to take to the streets, engaging in riots and looting.72 Popular discontent forced Alfonsin’s resignation, making him the first leader in nearly half a century to be legitimately replaced via elections.73 Carlos Saul Menem, the leader of the Peronist party, was elected as his successor.74

Menem radically changed the course of the economy by promoting freemarket policies and radical liberalization and privatization.75 Still, the positive attributes of Menem’s “economic capitalism” were hardly paralleled with sound democratic action in the political arena.76

B. Second Crisis:  De la Rúa’s Resignation

Menem’s dramatic economic transformations also had the effect of deepening already existing social problems.  Arguably, this situation was a consequence of the lack of a consistent long-term socioeconomic policy.  In any case, Menem continued the Peronist tradition of using specifically targeted welfare plans as a tool for political promotion—by 1990, the number of plans had risen to around thirty.77

In the 1990s, two very important changes occurred.  First, in 1992, Congress passed Law 24130 ratifying the “Federal Pact,” a country-wide agreement between the central government and the provinces that, among other things, decentralized the execution and management of welfare policies.78 The Pact determined the allocation of central resources to the provinces for their autonomous administration.79 Second, Argentina’s population underwent a deep change in the mechanisms of the social protest; specifically, social activism moved away from syndicalism-centered protests.80 For example, unions led 75 percent of protests between 1983 and 1988; but from 1989 through 1994, that percentage decreased to 60 percent.81 But from 1995 on, the dispersion of the protests is notable; other forms of public protest appeared at this time as well, such as the cacerolazos, which are now the characteristic form of protest by the middle class.82 Scholars refer to this period of social activism as a real “politicization” of Argentinean society.83

Menem was re-elected to the presidency in 1995, marking the third consecutive planned and peaceful election.84 In 1996, the “Plan Trabajar” was created as a palliative for unemployment.85 Beneficiaries were supposed to work in public infrastructure projects in exchange for a “salary” paid by the state.86 This relief structure (hereinafter referred to as the “plans”) became an important tactic against the unemployment situation.87 In the end, however, the plans were only a subsidy—a mere welfare payment, and opened the door to massive utilization of this technique for political gain and manipulation.88

The implementation of the social plans slowly formed a net of relationships between the different social actors and the different levels of the federal and local governments.89 Maristella Svampa and Sebastián Pereyra describe how Menem’s government used the well-lubricated clientelistic web, originally created by the Justicialist Party, for the implementation of the social plans.  The relationship between the government and the social organizations (including the piqueteros) was established through the municipalities and the provincial governments.90 The creation of the Plan Barrios Bonaerenses, financed by the provincial governments, was controlled from the Instituto Provincial de Empleo (Provincial Institute of Labor), which had the last word in the adjudication of the plans.92 The Institute also decided the appointment of the coordinator, a person with the authority to direct and execute a project.93 Consequently, a person selected as a coordinator wielded a great deal of power.

In practice, the Institute’s control allowed the plans to be allocated in exchange for political and electoral support of the Justicialist partisan infrastructure,94 resulting in the punteros and manzaneras, political neighbors, acting as activists of the Justicialist party in their respective zones of influence.95

Despite the mounting financial crises, Menem managed to finish his second term, but in 1999, an alliance of opposition parties propelled Fernando de la Rúa, a member of the biggest opposition party—the Unión Cívica Radical—to the presidency.96 Nonetheless, the persistence of economic problems, along with several corruption scandals in the Senate, quickly undermined the popular support that De la Rúa had enjoyed in the elections.97

As the country’s outlook worsened, De la Rúa’s government increased the budget for welfare programs and expanded the Plans Trabajar to nearly 270,000 people.98 And, because De la Rúa did not hold power with the clientelistic resources of Justicialism, he changed how the plans were implemented; he switched the allocation and management responsibilities to the municipalities and the NGOs.99 This strategy permitted some local civil society groups, including the piquetero organizations, to incorporate as formal NGOs in order to submit projects that would enable them to receive social plans.100 In spite of these efforts, escalating economic problems eventually led to a second crisis in December 2001.  As a consequence of several desperate and unpopular measures (such as severe restrictions on the withdrawal of bank deposits), nationwide riots paralyzed the country and De la Rúa was forced to resign, having only held office for two years.101

Because Vice President Carlos Alvarez had resigned under scandal months before the riots, the chairman of the senate, Ramon Puerta, succeeded De la Rúa.102 Puerta nevertheless resigned in a matter of days due to a lack of political support.103 When Puerta’s successor Adolfo Rodríguez Saa also stepped down immediately after taking office, he became the third Argentinean President to resign within two weeks.104 The Chairman of the Deputies Chamber, Eduardo Camaño, was then designated and sworn in as interim president for a few days until a Congressional vote could be held to determine a longer-term replacement.105 Finally, the Legislative Assembly selected Eduardo Duhalde, former Vice-President and Governor of Buenos Aires Province, as the new president to govern the country for a period of two years until new presidential elections would be held.106 Duhalde, a powerful Peronist, took office in January 2002 and was finally able to stabilize the political situation, and stop the revolving door of presidents.

To address the financial crisis, Duhalde sent a bill to Congress in January 2002, which was finally passed as Law No. 25.561.  The Act declared a “Public Social, Economic and Administrative Emergency” until December 10, 2003.107

Based on the powers provided in Law 25.561, Duhalde immediately:  (i) declared the “National Alimentary Emergency” by Decree No. 108/2002;108 (ii) declared the “Emergencia Alimentaria Nacional;” by Decree No. 165/2002;109 and (iii) created the “Plan Jefes y Jefas de Hogares Desocupados” (PJJHD), also by Decree No. 165/2002.110 The PJJHD was notable as the biggest subsidy in the country’s history, and would eventually supplant other welfare plans such as the Plans Trabajar.111

Under these plans, the terms of the Federal Pact were retained.  Thus, the execution of the national welfare program was still operatively decentralized.  The allocation of benefits was conducted through individual provinces which were charged with distributing the resources among the municipalities to implement the actual welfare program.112 In practice, municipalities with more than 25,000 inhabitants were allowed, by executive decree, to segment the operations by individual neighborhood.113

In April 2003, new presidential elections were held.  The results were close, but Nestor Kirchner, Peronist leader and former governor of the Santa Cruz province, was elected over former president Menem and continues to remain in office today.114

In sum, despite many difficulties, the presidential elections held since Argentina’s return to democracy in October of 1983 have arguably fulfilled minimum democratic standards.  They have been broadly accepted as free, competitive, clean, and fair, at least at a national level.  In fact, the way the crises (especially the last one in December 2001) were handled is seen by many as a demonstration of the robust strength of Argentina’s core democratic institutions.  Levitsky and Murillo maintain that

[t]he survival of Argentine democracy is, in any event, one of the most striking and yet under-appreciated outcomes of the 2001–2002 crisis.  Few democracies in the world have survived such a severe economic disaster.  But notwithstanding extreme levels of social protest and an atmosphere of chaos, the military refused to repress protesters and made no attempt to change the government.  Nor did presidents engage in extra constitutional power grabs.  Given Argentina’s history of regime instability, this was an extraordinary achievement.  Contemporary Argentine democracy has thus proven surprisingly robust.  It has survived the hyperinflation of 1989–90, the radical economic reforms of the 1990s, and, most recently, a depression unparalleled in the country’s history.115

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IV. The Threat to Democracy:  “Piqueteros,” The Political Mercenaries, and the State Clientelistic Practices with Social Plans

Notwithstanding the political stabilization described above, Argentina is undergoing a very difficult moment.  The socioeconomic situation is terribly volatile.  Poverty and inequality have risen to dangerous levels,116 and this situation is being exploited by partisan factors for political gain.  The clearest expression of this situation is represented by the piquetero movement and its cooption of large numbers of welfare plans under the PJJHD.

A. The Rise of Poverty and Inequality:  The Palliative Solution of the PJJHD

The World Bank estimates that the poverty rate in Argentina rose from 28 percent of the population in May 1998 to 37 percent in October 2001, and to 58 percent in October 2002.117 The World Bank states that “the number of people living below the indigence line doubled from 2001 to the end of 2002.118 Independent estimates put the total number of indigents at around eight million.119

The situation had hardly improved by 2004, with nearly half of the population still living at the poverty level.120 Moreover, income distribution may have worsened during the interim years, suggesting that the poorest segments of the population suffered disproportionately.121 An economic study in December 2003 indicated that 10 percent of the population held 38.6 percent of the GDP.122 And the most recent data indicate that as of 2005, 51.6 percent of the total economic resources are held by 20 percent of the active population.123

According to the World Bank, the rise in poverty has in large part been the result of an increase in the cost of food, a major expenditure for the poor.  Because food is an important export in Argentina, its cost spiked with the collapse of Argentinean currency.124 The World Bank reports, “[t]he break with the Convertibility Plan [which pegged the peso to the dollar from 1992 to 2002] also meant that the adjustment in the labor market occurred more through wages, rather than by an increase in unemployment.  Inflation reduced real wages substantially.”125 While the impact of the economic recession has been difficult for many groups, those among the middle class who have faced declining wages, coupled with the freeze on bank assets implemented under De la Rúa and continued by Duhalde, have been forced into poverty for the first time.126 These new poor are thought to have had a more difficult time adjusting to new circumstances.127

The impact of this situation is the worst in the Northern provinces and the Cuyo, but the effect is spread throughout the country.128 As mentioned above, unemployment also rose from 13 percent in 1998, to a peak of 22 percent in May 2002.129

On the whole, the economy in 2002 was estimated to have declined by 10.9 percent, bringing the reduction in GDP to over 20 percent between the peak in 1998 and July 2003.130 Moreover, the country suffered significant inflation from 2002 to 2003 for the first time since 1991.131 Between the economic decline and the currency’s depreciation, per capita GDP fell dramatically to an estimated US$2,695 in 2002 (down from US$8,210 at its peak in 1998).132 As the World Bank points out, very few countries in the world have ever seen such a sharp rise in poverty—an increase of more than 50 percent in just a few years.133 The World Bank, citing Ernesto Kritz’s background work, continues:

[E]very point rise in the price index for the basic food basket produces 50,000 more indigent poor in the country.  Furthermore, [Kritz] estimates that the decline in real income between May 2001 and May 2002, 30 percent can be explained by the fall in employment, 20 percent by a decline in nominal wages (including fewer hours worked), and 50 percent by the increase in prices.134

Poverty is not new in Argentina, but the levels to which it has climbed in the last twenty years are unprecedented, “resulting in severe social dislocations and a reduction of welfare by its poorest.”135 The situation described qualifies as a true “economic involution,”136 triggered by what has proven to be a spectacular increase in the utilization of and dependence on public welfare policies.  For instance, a report by the Sistema de Información, Monitoreo y Evaluación de Programas Sociales (SIEMPRO) shows public expenditures on welfare plans escalating from $29 billion in 1997 to $40.6 billion by the end of 2004.137

Argentina has been a pioneer in the utilization of social welfare policies in the twentieth century.138 But as shown above, these practices have increasingly moved from basic universalistic practices to more particularistic plans.  The allocation of resources has become increasingly arbitrary as it has been delegated to different politically managed public agencies with implicit partisan purposes.

The peak of these particularistic plans was reached with the creation of the PJJHD.  With a yearly budget of more than $3.5 billion and almost two million beneficiaries, the PJJHD is considered a welfare megaplan.139 Consider that Argentina’s total population had not yet reached forty million and that the plan was extended to nearly five percent of the population.140 It is by far the biggest and most important welfare plan in the history of the country.  In fact, it is the second biggest plan in Latin America, following the “Plan de Asistencia a Desprotegidos de México.”141

The explicit objective of the PJJHD is to provide financial assistance to heads of households with children, in order to guarantee the “Family Right of Social Inclusion,” which ensures:  (1) the school attendance and health of children; (2) access to formal job training and education; and (3) participation in productive projects or community services.142 In practice, however, program administrators are not collecting information on school attendance and heath.143 Likewise, most beneficiaries participate in traditional workfare activities such as community services and small construction projects, but very few utilize the education, training, or private sector employment options.144

The program’s implementation is decentralized and is handled through municipalities and communes, which collaborate with their corresponding municipal or communal council.145 These councils must implement and monitor the program as well as maintain transparency in the process.146 The municipalities, in turn, are tasked with assigning activities to the program beneficiaries in return for financial assistance; any public or private nonprofit organization can propose that certain activities be included in the program.147

The beneficiaries of the plan are intended to be unemployed heads of households with young (under eighteen years old) or disabled children, or those in which the female head, spouse, concubine, or cohabitant partner of the male head of household suffers from serious health conditions.148 To become eligible for benefits, the household member is supposed to provide certain standard information and documentation to the municipality and sign a sworn statement confirming that the information is correct.149 The benefit consists of a monthly payment of approximately 150 pesos.150

B. The Clientelistic Utilization of Social Plans:  The Piquetero Movement

1. The Piquetero Movement

[W]e block the streets.  We make that part of the streets ours.  We use wood, tires, and petrol to burn.  We do it like this because it is the only way they acknowledge us.  If we stood protesting on the sidewalk, they would trample all over us.151

On June 20, 1996, a group of workers who had lost their jobs at a major oil company, together with some of their neighbors, set up a roadblock on a major transit artery between the provinces of Neuquén and the Patagonia in protest against the severance of their jobs.152 That was the way the “piqueteros” were born.153 The phenomenon rapidly spread, becoming especially strong in the suburbs of the City of Buenos Aires.154 In the years since the piquetero movement’s birth, it has gathered thousands of followers that march on a nearly daily basis on streets and routes all along the country.155 The protestors have demanded, among other things, the withdrawal of police, the repudiation of state repression, the release of jailed comrades, unemployment benefits, food, and health facilities.156

The origin of these organizations is undoubtedly tied to unemployment.157 One clear collateral effect of the social and economic crisis described above was the transfer of an important amount of power from the traditionally strong unions to the organizations of the unemployed.  In fact, the media and other observers estimate the mobilization force of the piquetero movement to be more than 300,000 people throughout the country.158 But the piqueteros are not united.  There are several organizations of piqueteros; some are called “oficialistas,” for they are closer to the federal government, and others are called “opositoras” for being more reticent to negotiate.159

The piqueteros’ political map can be described as follows:

The first block of groups is called “Central de Trabajadores Argentinos” (CTA).  In this block, the organization that clearly stands out is the Federación de Tierra y Vivienda, led by Luis D’Elia.160 Originally a school teacher, and later a provincial deputy, D’Elia is the leader of Federación, the biggest piquetero organization at more than 125,000 members.161 The Federación unites the “oficialistas”—those more likely to negotiate with the government.162 The other organization in this block is the Barrios de Pie y Patria Libre, which unites around 60,000 people.163

The second block includes groups that are tougher in relation to the government, including the Corriente Clasista y Combativa with approximately 70,000 members.165 This organization can be qualified as politically moderate as compared with the Bloque Piquetero Nacional, which unites the leftist branches of this movement.166 This latter group is integrated by a series of smaller organizations:  the Polo Obrero, the Movimiento Teresa Rodriguez, the Frente Único de Trabajadores Desocupados, the Coordinadora Anibal Verón, the Movimiento Sin Trabajo Teresa Vive, the Agrupación Tendencia Clasista 29 de Mayo, the Movimiento Territorial de Liberación, and the Movimiento Independiente de Jubilados y Pensionados.167 Among these, the most important group is the Polo Obrero, with 25,000 adherents.168

Despite their political differences, the piqueteros share a common tactical methodology.169 They conduct “pickets,” or road blockades, to press their demands.170 During the road blockades, the piqueteros often utilize burning tires as barricades.171 Another common practice is to march on the most important arteries of the City of Buenos Aires, and other important urban centers, making traffic circulation impossible.172 Members wear masks to cover their identities while conducting both types of activities, and brandish large, heavy, threatening sticks.173 Their actions are carefully planned and executed with military precision.174 A study by the New Majority Studies Center states that in the province of Buenos Aires there were twenty-three roadblocks in 1997.175 By mid 2002, there had been 1,107 roadblocks concentrated in the same area, and these tactics were growing throughout the country.176 The use of these tactics is in response to the obvious reality that the piqueteros, being unemployed, cannot go on strike.

But the marches and pickets can cause severe economic damage to private actors and these actions provide a constant nuisance to the common people.  Often the protests go as far as invading private businesses or blocking access to malls in demand for food, toys, or even money.  One such violent protest was the occupation of a McDonald’s store in June 2004 with a concurrent demand that McDonald’s immediately deliver 20,000 boxes of milk and 10,000 school books.177 Also in June of 2004, access to a Carrefour Supermarket was blocked and a demand was lodged for the immediate opening of two-hundred new jobs.178 The next month, on July 16, 2004, piquetero violence reached its peak when a massive group of piqueteros tried to occupy the Legislature of the City of Buenos Aires.179 Strong voices have risen against these practices, arguing that such actions infringe on an individual’s constitutional right to work and to circulate with the rest of the population.180

2. Allocation of Social Plans to the Piquetero Movement

The fight for a governmental concession started with a mounting conflict between the “punteros” and the local neighbors.181 The “punteros” were among the central figures of the justicialist clientelistic web.182 The increasing abuses by the punteros slowly led to the organization of autonomous civil society actors at a local level.183 These civil society actors were the antecedents of the piquetero organizations.184 With the government’s concession of plans to these organizations and with the change in the federal tactics for distribution under De la Rúa, the piqueteros gained the necessary resources and power to grow to their current status.

The concession of 10,000 Plans Trabajar was the turning point in the exponential growth of the piquetero movement, as that first allocation was subsequently followed by many others.  In fact, up to the end of 2002, the piquetero organizations controlled more than 200,000 of the PJJHD (about ten percent of the total plans), which have supplanted the Plans Trabajar.185 In effect, the Federación Tierra y Vivienda manages about 75,000 plans, and Barrios de Pie, 60,000.186 On the side of the groups “opositores,” the Corriente Clasista y Combativa, has about 70,000; the Movimiento Independiente de Jubilados y Desocupados, around 60,000 more; the Polo Obrero, about 20,000; the Coordinadora de Unidad Barrial, almost 5,000; and the Frente de Trabajadores Combativos, about 2,800.187 Once the piquetero groups gained control over a large number of plans, the activity of the groups reoriented towards conserving and enlarging their share of the plans.188

Because of its political importance in gaining partisan loyalty, the handling of the plans became the center of a political fight between the federal government and the provincial governors of the Justicialista party.189 The plans were often criticized as being “instruments of political territorial domination” and “springboards for the construction of partisan structures.”190 In certain cases, even cash was directly handed to these groups.191 In some provinces, the unproductive social cost of these plans is a significant contribution to fiscal imbalance.192 It has been argued that, with the continuation of these practices, the beneficiaries of these plans are condemned to depend perpetually on such gifts, instead of being guided toward transforming themselves into qualified workers capable of reentering the labor market.193

The situation is not without its opposition by other parties.  For example, Ricardo Ivoskus, a member of the Affirmation for an Egalitarian Republic Party (ARI) and intendente194 of San Martin, an important community of the province of Buenos Aires, said, “[t]he partisan manipulation in the management of the social plans promotes political clientelism and, consequently, the mercenary distribution of resources to the poor sectors, in exchange for votes or the participation in protesting marches.”195

Moreover, the “Unidad Fiscal de Investigacion de Delitos de la Seguridad Social” (UFISES), a special unit created to investigate irregularities in the execution of the welfare policy, began an investigation of alleged irregularities in the management of PJJHD in 134 municipalities in the province of Buenos Aires.196 Guillermo Marijuan, chief prosecutor of the UFISES, denounced more than 2,500 people employed by seventy-seven municipalities within the province of Buenos Aires as improperly cashing in on PJJHD.197 Up to the end of 2004, the UFISES analyzed more than 4,600 cases, resulting in the invalidation of more than 10,000 beneficiaries and in savings of 1.5 million pesos per month for the PJJHD system.198

It is clear at this point that the plans generate direct benefits to the piquetero organizations, and that direct assignment of benefits has been used as a way of controlling conflicting groups.  Moreover, the structure and process for the assignment and management of the social plans, in particular the PJJHD, has provided incentives for clientelistic—and sometimes corrupt—practices.

First, decentralizing the implementation of the PJJHD from the central government to the provinces was coupled with a deeper decentralization of the allocation of the plans at the municipal level.  Two political actors have a central role in the adjudication of PJJHD:  (1) the Municipal Consulting Councils (the “municipal councils”), integrated with representatives of labor unions, business associations, and social and religious organizations; and (2) the intendentes of the municipalities.

The PJJHD was designed as a workfare program; the beneficiaries of the PJJHD are supposed to participate in productive projects, communitarian services and training courses intended to integrate them to the country’s working force.199 Furthermore, the training and participation in productive projects was intended to be provided through private businesses and other public and private institutions; these institutions are required to be registered in a special register managed by the National Ministry of Labor, to pay a supplementary salary, and to meet certain conditions established by law.200

Failure to participate in the training and productive projects is supposed to lead to the extinction of benefits.201 According to the World Bank, however, “program administrators are not collecting the information on school attendance and hea[l]th.”202 The same study also finds that “most of the beneficiaries participate in traditional workfare activities (community services and small construction projects) and only very few take advantage of the education, training and private sector employment options.”203 And, the local authorities (intendentes and municipal councils) have been given a great deal of power in the allocation of these resources:  any person that qualifies for the PJJHD is free to apply for the plans, but it is the signature of the zonal intendente that sends the application to the Ministry of Labor “Registro Nacional de Beneficiarios de Planes Sociales.”204

Also, even though private actors are invited to submit proposals for “productive projects,” they have to present their project proposals to the Consejos Consultivos.205 The Consejos Consultivos then reports to the intendente recommending either the approval or rejection of the project, and only approved proposals are able to get into the program.206 The Consejos Consultivos are also responsible for controlling the instrumentation of the program in their respective jurisdictions.207 They are supposedly supervised by the provincial governments and the National Ministry of Labor,208 but in reality, this supervision is almost perfunctory.

The Conjunct Resolution of the Ministry of Labor and the Ministry of Social Development 284/2002 and 91/2002 opened the door for the participation of nongovernmental organizations in the PJJHD.209 To that end, Article 4 established that they should apply and be approved by the Consejos Consultivos of the municipalities in which they were to act.210 There have been accusations that many Consejos Consultivos have been coopted by partisan local factions and generally shepherded by the local intendentes.211 In fact, some beneficiaries have had to “contribute” as much as forty percent of their total benefit to the municipal authorities.  There also remains a problem of representation because the Consejos Consultivos are very much dependent on the municipal authorities.212 This has been said to be due to (1) the close relationship at a local level between the government authorities and the civil society groups and (2) the autonomy that the legal rules give to the Consejos Consultivos regarding the assignment and management of the PJJHD.

Additionally, the structure for adjudication and management of the PJJHD encourages clientelistic practices.213 Specifically, direct relationships exist between many NGOs and political actors.214 These NGOs include the piquetero organizations Federación Tierra y Vivienda, and Movimiento Independiente de Jubilados y Desocupados.215 Thus, the piquetero organizations have a strongly favorable position in the framework of clientelistic practices relating to the assignment and management of the PJJHD.216

Furthermore, there were criticisms about internal manipulation of the PJJHD by the piquetero organizations.217 As indicated previously, the benefits are awarded only to those members that comply with several internally established conditions such as periodic participation in the protest marches and other political activities.218 This works as a “credit” system in which assistance is controlled.219 In this way, the benefits are used as a mechanism designed to guarantee the loyalty of its members and their unconditional participation.220 Finally, there have been accusations of situations where some of these organizations forced the beneficiaries to pay a fee, or peaje, for example, for the use of roads.221 Beneficiaries were forced to pay this fee under the threat of losing their benefits entirely.222

In 2004 the central government responded to these corrupt practices by implementing “tarjeta social,” a program that provides debit cards directly to the beneficiaries to ensure they cash their benefits.223 Tarjeta social also allows the beneficiaries to directly use the card for buying groceries and other essential goods.224 Nevertheless, the actual implementation of this system is still very limited.225

C. The Black and White Sides of the Piquetero Organizations

Apart from these protest practices, some of the piquetero groups have devoted important resources to address the most urgent effects of poverty within their communities.  Many groups have undertaken an enormous variety of self-help or cooperative activities, including collectively constructing community or health centers, creating youth programs, planting gardens, raising livestock, organizing festivals, and the creation of an impressive number of collective neighborhood soup kitchens.226 The same people who work in these places are those who, wearing masks or not, set up roadblocks or light fires to block access to the capital.227

Undoubtedly, the most relevant aspect of the piquetero movement is its capacity as a civil society agent, acting as a vehicle of the popular claim.  Julio Godio sustained that the internal cohesion of each of the piquetero organizations is based on the spontaneous reaction of the each of the unemployed to solve their more immediate problems by the achievement of the social plans.228 Their claim was not channeled through the natural agents—political parties and labor unions—because of the failure of these agents to avoid the crisis that exploded in 2001.229 Nevertheless, this “negative policy,” not complemented by a clear ideology or long-term ideas for political action, deeply limits the piqueteros’ possibilities.230

Thus, some accuse the piquetero organizations as acting as mercenaries in exchange for political favors or economic advantages.  Indeed, the piquetero organizations have been involved in protests completely unconnected with their principles and purpose.231 Such protests can only be explained by the need for continuous activism in the organizations.  At the extreme, some say the piquetero organizations have collaborated with partisan factions in some very important political situations,232 for example, the political unrest that ended with the resignation of De la Rúa in December 2001,233 or the case of the violent protests against the governor of the Province of Santa Fe in May 2002.234
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V. Is This an Example of the Failure of Civil Society Actors?

A. Introduction to the Problem

In the case of the implementation of the PJJHD there was an explicit legislative choice to open a broad space for the participation of civil society actors.  In effect, the legal regulation put the PJJDH in the hands of the smallest political units, basing the direct participation of the neighbors in the allocation and administration of the benefits in each of these small jurisdictions on the Consejos Consultivos.235 Moreover, the regulations explicitly opened the door to participation of NGOs.236 Among them, the piquetero forces as the direct representatives of the unemployed beneficiaries of the PJJHD, were allowed to directly participate in the management of a significant number of these plans.  The situation, however, generated fertile ground for corrupt practices, especially the clientelistic cooption of resources for partisan benefit.

B. Socioeconomic Requirements for a Functional Third Sector

Weisbrod suggests that “the nonprofit [sector] emerges as a solution to the under-provision of public goods.”237 Public goods are defined as those that cost no more to provide to multiple persons than to a single person, and whose benefits cannot be limited once they are produced.238 Weisbrod’s theory is based on the idea that “[g]overnments supply the quantity and quality of any public commodity that is determined desirable by a political voting process.”239 Whenever the process “does not enable individual consumer-citizens to equate the value of the tax they pay with the marginal utility received from an additional unit of that good or service, [they] can turn to the private for-profit sector for a substitute” for the undersupplied public good.240 However, Kalb notes

these alternatives are often expensive and in some cases ineffective.  Unsatisfied consumers . . . have an incentive to collectively subsidize a higher level of public goods through the nonprofit sector—as long as they gain more utility from jointly subsidized public goods than individually purchased private sector substitutes.241

Kalb has argued that Weisbrod’s “model fails to explain why the private sector does not simply pool the consumers left unsatisfied by the level of government provision and create a profitable collective alternative.”242 Kalb gives the following example to explain this gap in the model:  a local government provides some measure of security through a police force.243 If certain individuals desire an increased level of home security, they might purchase a home security system.244 But this solution might be cost prohibitive for individual homeowners.245 Weisbrod suggests that “the set of disappointed consumers . . . would turn to the nonprofit sector to purchase the incremental amount of security, perhaps through subsidizing some kind of neighborhood watch program.”246 But there is also the alternative for “the community to hire a private security officer to patrol the neighborhood.  Weisbrod’s model fails to recognize the possibility of collective purchases of private substitutes for public goods.”247

Other scholars, such as Professor Hansmann, focus on the problem of contract failures to explain why the private sector will fail to efficiently provide certain types of services that consumers find desirable, as compared to the nonprofit sector.248 In doing so, they help explain why a private security company might materialize to compensate for inadequate levels of public security, but would not emerge to provide an increased level of human rights advocacy or environmental protection.249 This model posits that nonprofits are a more “trustworthy” alternative to the for-profit sector in making available services that are difficult or costly to monitor.250

A contract-failure model has been designed by Professor Hansmann to demonstrate how “the trustworthiness of nonprofits allows them to compete effectively with private sector providers.”251 In his model, nonprofits “emerge when there is a need for greater trust in the provision of services.”252 Hansmann observes that an efficient market requires that

[c]onsumers can, without undue costs or effort, (a) make a reasonably accurate comparison of the products and prices of different firms before any purchase is made, (b) reach a clear agreement with the chosen firm concerning the goods or services that the firm is to provide and the price to be paid, and (c) determine subsequently whether the firm complied with the resulting agreement and obtain redress if it did not.253

A contract failure arises when these conditions are not met, indicating that consumers need to put a greater level of trust in their supplier.254 According to Hansmann, there are three kinds of situations where contract failure can give rise to nonprofits:

(1) Where there exists an important separation between the purchaser and the recipient of the service.

(2) Where there is a public good at stake.  Here, the contract failure is caused by the fact that the value that each citizen receives from a public good is difficult to measure.  Thus, it is hard to extract a contribution proportionate to the value of the good.

(3) Where the provision of certain kinds of services is so complex and nonstandard that it is hard for the consumer to determine if the services are performed adequately.255

In these contract-failure situations, “provision by a nonprofit is desirable because the nonprofit is more trustworthy than a for-profit organization.”256 This is because the nondistribution constraint under which nonprofits operate eliminates the incentive to “maximize profits” through cost cutting or degrading the product or service.257 Officers have no reason to “milk” their customers since “they cannot benefit from the increased revenues.”258

Of course this does not mean that officers could not benefit via handsome salaries and other, nonmonetary perks, but this kind of opportunism is reduced because other incentives guide the nonprofit officers.259 The incentives that drive these third-sector actors include, for example, beliefs, pursuit of power, fame, knowledge, or simply making a living.260 The fact is that, for nonprofits, non-pecuniary goals are dominant.261 Indeed, the empirical evidence on nonprofit entrepreneurship in developed economies supports Hansmann’s theory of self-selection.262

The nonprofit sector’s trustworthiness “makes it competitive with a for-profit organization when consumers . . . have difficulty monitoring the outcome of their financial contributions.” 263That is why public goods such as environmental protection, human rights, and charity are entrusted to nonprofit organizations.264 But, consequently, when the trustworthiness of the nonprofit organization is challenged, this comparative strength vis-à-vis the for-profit form is lost.

C. The Failure of Self-Selection in the Developing Countries:  Its Failure in Argentina

Kalb points out that nonprofits in developed countries

[f]ace tough competition from profit-making organizations in raising venture capital, as evidenced by the concentration of the nonprofit form in labor-intensive service industries with low capital requirements and a substantial opportunity cost associated with choosing nonprofit sector work.  Therefore the entrepreneurs and workers who self-select into the nonprofit sector seem to be compensated by a variety of non-pecuniary benefits.  They choose the nonprofit sector because they “believe” in the work.265

But Kalb argues that the situation in developing countries is completely different.266 In these developing environments, she argues, the self-selecting process fails because higher rewards are available in the nonprofit sector versus those in the public or private sectors.267 Arguably, that generates a negative effect by which the nonprofit actually impedes the development of other sectors because financial and human capital is funneled to the nonprofit sector rather than the governments of developing countries.268 In effect, the nonprofit sector, by offering more attractive rewards than the private and public sectors, attracts the better-skilled human capital and higher levels of monetary resources that could otherwise be used for real economic development.269

This situation can be observed in Argentina.  Many of the economic reforms of the first Menem administration were designed to reduce government spending.  These measures involved massive privatization and the diminution of state employment.270 With these measures, those once highly-coveted and lucrative public service positions became unavailable to a large sector of the population.271 Since this situation was not accompanied by parallel growth in the private sector, the result was to increase unemployment.272 In effect, the intended transition of a huge number of people from the unproductive public sector to the productive private sector was never completed.

In this context, the PJJHD provided the economic foundation for the piquetero organizations to grow a politically influential size.  These organizations were born with the explicit objective of directing the claims of the unemployed to the government.  But the same resources that strengthened these organizations created their biggest weaknesses.  Since the government is the object of the piquetero protests, and also the provider of the resources that allow its existence, an incentive has been created for the apparition of clientelistic practices.  In essence, the piquetero organizations provide power; but their officers, in order to retain that power, require a sustained flow of resources.  Those resources come from the government itself, and it has leverage to ask for political compromise in return.  This compromise can take the form of political or electoral support, attacks against enemies of the government, and even acts of violence against enemies of the ruling party.

This divergence of piquetero objectives also happens internally.  In order to function, the piquetero organizations must maintain a system of prizes and punishments to test the loyalty and commitment of each of their members.273 The indirect effect of this system is the continued manipulation of the members by the organizations, and the generation of a vastly expanded number of protests.274

Every unemployed person has a strong incentive to participate in the movement.  Because the PJJHD is subject to seemingly arbitrary manipulation by these organizations, members are more likely to participate in each and every one of the movement’s protests, whether or not that individual identifies with the objectives of the act itself.

In sum, there are numerous undesired effects of the Argentinean situation:  First and most important is the distortion of the organizations’ functioning.  As previously shown, NGOs are expected to be essential participants in a developing country’s civil society by providing a voice for constituencies unable to speak through more traditional channels (this is clearly the case for unemployed people in Argentina).  Successful NGOs can “act as a counterweight to state power—protecting human rights, opening up channels of communication and participation, providing training grounds for activists and promoting pluralism.”275 But by relying on governmental funding for survival and growth, these organizations compromise their objectives.  Ironically, the funding intended to benefit individuals without employment dictates their principal channel of expression.

At a more general level, the organizations intended to promote the development of a more healthy civil society through strengthening its institutions are actually a base for opportunistic partisan practices and widespread corruption.  This distortion in the organizations’ objectives deviates from actions benefiting the interests of their members.  Without an active and independent civil society sector to represent them, the unemployed in Argentinean society stands to lose one of their voices.

Second, in addition to the loss of present day growth opportunities, it can be inferred that the piquetero organizations are distorting the development of human capital, and thus perpetuating an unsustainable model of economic development.  Being a member of one of these organizations is a method of receiving enough money to make a living, but it discourages the pursuit of other alternatives.  This situation impedes the realization of long-term economic and social development objectives.  Ironically, it discourages re-employment of their members, by retaining them in the fight for the creation of work positions.  It can be argued that this consequence derives not from the participation in the piquetero organizations, but from becoming a beneficiary of a welfare benefit provided by the state.

The participation in the piquetero organizations, however, actually generates further deterrence.  It is not only the cashing of money from the state, but also the participation in an active role, which acts as an obstacle in the re-employment of these organizations’ members.  Members are given a sense of being part of a movement that fulfills their need for social recognition, and participation in the organizations’ activities and protests also fills their time.  This situation stops members from searching for other more productive alternatives, such as pursuing additional personal qualifications or alternative employment, and turns unemployment into a permanent status.

Third, the pathological link between the piquetero organizations and the federal and provincial governments generates corruption and clientelism.  O’Donnell argues that clientelism in Latin American polyarchies has become an “informal, permanent, and pervasive” institution.276 He described polyarchies as “various sorts of nonuniversalistic relationships, ranging from hierarchical particularistic exchanges, patronage, nepotism, and favors to actions that, under the formal rules of the institutional package of polyarchy, would be considered corrupt.”277 Those with access to the public power are able to reach benefits that the rest of the population, bound by the established rules, cannot.  The arbitrary allocation of the PJJHD generates a “race” among the constituencies, enabling their participation to be manipulated for political purposes.  It also generates blatant corruption in the form of private appropriation of public resources by the political agents and organizational leaders involved in the process.

Fourth, the multiplication of protests is a necessary consequence of this “race.” The PJJHD are distributed from the top-down, beginning with the most active and politically involved.278 This manner of distribution permits the leaders to ensure the loyalty and compromises of its members.  But it also generates significant social cost.  As previously discussed, an inordinate number of hours are spent on protests.  More importantly, the focus on protests dilutes the underlying message these organizations are supposed to deliver.

Fifth, this continuous activism is fed by a message of “social fight.” This perceived fight is based on resentment among the unemployed and lower-classes toward the business sector, disrespect for private property and circulation rights of the rest of the population, disobedience to institutions of the judiciary, the police, and the army, and a general sentiment of a social right to be maintained sine die by state welfare.  This undercurrent disturbs the functioning of democratic institutions and generates a chasm between the unemployed and the rest of the citizenry and, among the younger generations, creates a serious risk of future civil disruption.

The piquetero problem demonstrates how the proper operation of NGO organizations is undermined by dysfunctional processes for distributing benefits.  It also provides an example of when the use of NGOs creates inefficient incentives that result in outcomes contrary to those intended.  In sum, the utilization of the piquetero organizations in the allocation and management of the PJJHD creates incentives for corruption and transforms a transitory solution into an entrenched and undesired problem.

D. Proposals for Reform

1. Is Increased Transparency the Proper Solution?

Attacks on NGOs for being unaccountable and poorly rooted in society have increased in the last years279 as have demands for stricter control over NGOs.280 It has been said that critiques are lodged by those who would dismiss the right of civil society groups to represent citizen groups and participate in the decisionmaking process.  It has also been recognized, however, that civil society accountability is nevertheless an extremely important issue that relates to such basic ideas as legitimacy and credibility.281
But NGOs present a considerably more complex challenge than other sectors for two reasons.  In the first place, NGOs, unlike other social agents such as governmental officers or for-profit entities, have not yet developed any customary mechanisms for reporting on their activities.282 As a consequence, it is extremely difficult to measure the impact of NGOs and the cost-effectiveness of their behavior.  Some theorists have tried to solve this problem by constructing ways to measure the NGOs’ performance.283 But there are still no clear solutions.

It is hard to attribute specific achievements to individual NGOs or count the efficacy of non-market based activities; it is harder still to crack the connection between NGOs and either development or democratization.  And yet as the NGO sector grows in both scope and power, it is precisely these measurements that become more critical.284

These problems can easily lead to the traditional responses of governmental regulation of the sector through increased requirements for transparency and financial disclosure.285 To a certain extent this solution may be appropriate, but care must be taken that those stricter standards do not create a barrier to the participation of smaller groups or narrow the autonomy and freedom of these organizations.  Alternatively, the nonprofit sector might address the need for accountability through self-regulation thereby establishing and strengthening standards for behavior and transparency.286

Consider the following accountability mechanisms:

- Self-regulation mechanisms, such as “codes of ethics” or “codes of conduct.” The idea behind such self-regulation mechanisms is that the sector itself should be actively engaged in promoting its own values and norms to maintain a high public reputation and ethical behavior.  These mechanisms have been criticized as being unenforceable.287

- Governing Boards comprised of independent individuals, selected and acting in a clearly predefined and transparent way.  They are intended to act as guardians of the interests of the organizations’ members and to ensure that the organization operates in compliance with its statutory obligations and principles.288

- Standards for disclosure and public reporting are determined in some countries by national legislation.  In other cases, however, they are voluntarily adopted by the organizations.  This involves the presentation of annual reports, project and strategic plans, and regular communications that open channels for public access about the organization’s work, financial status, governance structure and operational impact.289

- Consultative and participatory mechanisms that allow for the meaningful involvement of the organizations’ constituencies in the organization’s work.290

There are many other accountability mechanisms that are being used by civil society groups to proactively and self-critically take responsibility for their organizational activities.  These tools are not mutually exclusive and can be combined to achieve better results.291

This new tendency towards self-regulation comes from the realization by nonprofit organizations in regard to how much they rely on the confidence and trust of their constituents and as a response to the growing trend towards stricter governmental regulation.292 Proactive behavior will always prove more effective than compulsory laws.

There is another reason that increased monitoring would be no more than a limited solution with regard to the piquetero problem.  The contract failure theory developed earlier explains why nonprofit organizations are perceived as desirable choices to provide public goods based on their trustworthiness.  This trust is particularly valuable in the provision of these goods because there is an intrinsic difficulty to measuring or valuing the way and form of the provision of the good itself.  Indeed, as elaborated by Hansmann, “[t]he complexity of the services, their nonstandardized character, and the circumstances under which they are provided make it difficult for the consumer to determine whether the services are performed adequately.”293

In effect, it is because the services provided are difficult to monitor that participation of the NGOs presents a greater value.  If that trustworthiness fades, the case for nonprofit intervention disappears.  In the case of the piquetero, transparency will not eliminate the harmful incentives created by the utilization of such organizations in the allocation and management of the PJJHD.  Given the incentives of these organizations, and the fact they have failed in their primary task, there is no reason to maintain the PJJHD in their hands.

2. Accountability, Not Direct Participation

Perhaps the worst accusation that can be made against an NGO is that it acted in collusion with governments, or partisan factions, while masquerading as a defender of civil society.  When this happens, civil society actors are guilty of treason against the very principles that justify their creation.

A certain alliance with the government in regulation and execution of public policy is important to forestall inefficient, unilateral action.  But as the case of the piquetero movement demonstrates, NGOs are exposed to capture and clientelistic practices.

A line can be drawn between two different forms of participation:  “management actions” and “accountability actions.” Management actions are direct actions in the execution of public policy, where civil society actors receive and manage public funds for the application of public programs.  Accountability actions, on the other hand, refer to the participation of the NGOs as controllers of the execution of public policy by the government.  When acting in this last capacity, civil society actors are “on the other side of the street” and usually conserve their objectivity and autonomy.  This species of actions also include the participation of civil society in the elaboration of public policy, as close representatives of the interests of society as a whole, or certain groups of it.  When exposed to management actions, NGOs risk a departure from their normal incentives.

The decision of how far to take the participation of nonprofit organizations is a question that has to be answered on a case-by-case basis.  While there has historically been a problem of underinvolvement by civil society actors, the example of the piquetero organizations shows there can also be problems of overinvolvement.

As a starting point, it can be said that the efficacy of civil society actors is directly dependent on their autonomy from the ones they are supposed to control.294 The most obvious pressures for cooption arise from aid finance; as Hulme and Edwards state, “[h]e who pays the piper calls the tune.”295 And Ackerman is correct that “[f]unding is a crucial issue . . .”296 As the piquetero example shows, if the actors holding the government accountable are funded by that very same government in a discretionary manner, the NGO’s ability to proactively hold themselves accountable is compromised.  But Ackerman rightly states that this argument should not be taken too far:

An organization that receives resources from the government is not necessarily “bought off”.  If resources are disbursed transparently and with the use of objective criteria the fear of cooptation is significantly reduced.  The numerous existing public universities, public investigation commissions and government funded citizen councils demonstrate that public money and public criticism can go hand in hand.  In addition, there are numerous ways in which societal actors can be invited inside the state without any money exchanging hands, including legal figures such as “social audits” and “citizen comptrollers.”297

The problem presented by the piqueteros is different from those cited by Ackerman.  Whereas a public university founded by state money can maintain a sufficient degree of autonomy, it is more difficult to do so in the case of the piqueteros.  The reason lies in the fact that a public university’s role is primarily the provision of education while the piquetero organizations are given the task of allocating the PJJHD among their own constituencies.  The university officers have, by contrast, little incentive to provide poor educational service.  If they do, they will suffer in terms of reputation.  These officials could probably reduce costs (perhaps to the detriment of the quality of the education provided), but this reduction will have very little direct impact on their direct welfare or power.  On the other hand, officers of the piquetero organizations can gain by maintaining a lack of transparency in the allocation and management of the PJJHD.  Therefore, an incentive exists for them to allocate and manage their resources in the way that generates the greatest power for their organizations as opposed to allocating them according to welfare principles.  More unemployed will mean more piqueteros, which will, in turn, provide a bigger political force for the organizations’ leaders.

Thus, it is necessary to highlight the extra care that has to be taken in involving civil society actors in these kinds of activities.  This is especially true in Latin American countries, where the existence of a culture of asymmetric reliance on governmental support as a way of obtaining personal gain is culturally entrenched.  Furthermore, in cases like the one described, the utilization of civil society organizations in management activities is to be avoided.

3. How to Solve the “Piquetero Problem”

The credibility of NGOs depends on an internal culture of commitment to principles; this is absent in developing countries.  In practice, this culture is supplanted by one of opportunism, where the utilization of civil society actors in management actions will likely generate problematic incentives and a base for clientelistic practices.

Solving this problem will not be simple.  A longterm objective would be to introduce the self-selection process that is present in developed countries.298 This will require the generation of a more powerful private sector where human and monetary resources, governed by the incentive of profit, will flow.  Further, only those resources which align with nonprofit objectives should be directed towards the nonprofit sector.  The reintroduction of this self-selection process will ensure the presence of committed individuals in the nonprofit sector.

To manage this process in developing countries, governments must generate a stable and prosperous environment.  This implies a commitment to be governed by the inflexible rule of law.  Moreover, governments need to lower the starting costs of private enterprises as a way of attracting idle human and financial capital towards growth-generating activities.

But other more immediate measures could also be useful.  First, NGOs should not be given management functions by the state in the implementation of welfare policy.  This market for nonprofits is an artificial one.  In other words, their participation is not out of necessity, but rather from the arbitrary intervention of the state.

This does not mean that NGOs should not intervene in welfare policy, but rather that they should do so when their incentives are aligned with the underlying goals and when they can do so without financial ties to the government.  More importantly, NGOs must act as guardians of the correct allocation of welfare destined public resources by the federal, provincial, and municipal governments.  In the case of the piquetero problem, this means that the allocation of the plans and its management has to be moved from the NGOs to strictly controlled governmental agencies.

Second, to avoid stagnation among beneficiaries, the PJJHD should be given to recipients only for a limited time—a time that is long enough to permit reintroduction of the unemployed into the working force and short enough that it does not devolve into permanent status.  The PJJHD should enable beneficiaries to achieve further job-related qualifications or to search for a new employment position and should be limited to its intended status as a mere “subsidy.” The pretense of providing work as consideration for the money received should be avoided entirely, as it has proven to be a breeding ground for corruption.  Obviously, a completely successful outcome is conditioned on growth in Argentina’s economy.

Finally, more efficient controls in the allocation of PJJHD are needed.  Improvement can be achieved by creating a more centralized system and simplifying the complex and intricate array of rules that currently govern the subject.
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VI. Conclusions on the Participation of NGOs in Welfare Policy

The piquetero problem shows an example of failure in the use of NGOs.  More efficient accountability controls, although useful, would only be a limited solution for the case presented because transparency will not eliminate the harmful incentives that are currently in place.

In accountability actions—where NGOs act merely as controllers of the execution of public policy—the use of NGOs can be undoubtedly valuable.  However, when these organizations are utilized for management activities—that is, where NGOs receive and manage public funds for the application of public programs—there is a greater risk of deviation from their proper incentives.

If one role of civil society actors is to hold other bodies accountable, they must maintain autonomy, particularly from those they serve to check.  The most obvious opportunity for the breach of this autonomy occurs when the civil society actors become dependent on government bodies for financial support.  Because of this dynamic, NGOs should generally not be given management functions in the implementation of welfare policy.  As suggested by the contract-failure theories—that the greatest value of NGOs is based on their trustworthiness—this conclusion is strongest with regard to developing countries.  The use of NGOs for management actions in developing countries is likely—as in the case of the piqueteros—to generate problematic incentives, thus leading to clientelistism and other corrupt practices.

VII. Final Words

As shown in the first and second part, Argentina overcame more than fifty years of political turbulence and to return to democracy.  Despite the social and political crises suffered during the 1980s and 1990s, the country proved that it has a well-established electoral continuity.  Nevertheless, as shown in the third section, Argentina’s democracy is not doing well.  Poverty has increased exponentially, inequality is deeply entrenched, and, as in many other Latin American countries, its institutions suffer from a rotting corruption at all levels.  As Susan Rose-Ackerman states, “[w]idespread corruption is a symptom of a poorly functioning state.”299 Similarly, in the words of Daniel Poneman,

[T]hose who speak of the return of democracy in Argentina misstep.  Democracy has never truly existed there.  It must be established, which is vastly more difficult.  The task is not merely to revive a familiar or respected system, but to reverse the long Argentine tradition against democracy and in favor of caudillismo, plotting, knavery, and violence.  Reformation, not restoration, is needed. . . . Only a sea change in attitudes will bring a long-term perspective to Argentina.300

Even a well-established electoral continuity is not sufficient to guarantee the well-being of the constituencies when corrupt practices are so entrenched.  Corruption is an illness that tampers with the basic functions of democratic institutions, and pervasive corruption undermines the basis of a government’s legitimacy.  When citizens lose faith in political and legal institutions, they may become cynical or even rebel.301 Democracy’s fundamental contribution—that political authority comes from each and every member of society—can be eroded to the point of disappearing.  In other words, the survival of the system could be at stake.302 This is exactly the situation in Argentina.

Footnotes

For complete footnote citations, download the PDF.

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