By Roger Sugden
This essay considers transformation of the supply-side as an economic policy challenge for the Macri government in Argentina, and examines support for universities as a way of meeting such challenges. It introduces the context of previous Argentinean administrations and considers experience in developed countries, focusing on UBC’s experience in the Okanagan, a region in Western Canada with some similarities to Argentina.
The Kirchner administrations in Argentina (2003-2015) arguably benefited from high commodity prices on world markets that stimulated the economy by giving high returns to agriculture and natural resources – for example soy, perhaps also shale oil. The de la Rúa administration (1999-2001) had no such luck, otherwise it might have been able to avoid the worse excesses of the financial crisis and social unrest that precipitated its collapse. Good fortune is similarly lacking for the new Macri government (installed in December 2015), commodity prices having fallen significantly over recent months.
One thing that Macri might benefit from is foreign investment. His freeing of the dollar exchange rate is (in part) intended to lure funds that would boost the supply-side of the economy, and achieving this objective might be helped by the slowdown of its neighbour, Brazil. But Macri might do well to think about Argentina’s own experience in the 1990s. The Menem administrations (1989-1999) relied on foreign investors and indeed Argentina became the poster child of the IMF. The benefits were short-lived and the country eventually lost out with those policies, the economy going into a severe downturn (leaving the de la Rúa administration with a legacy that it never came to grips with).
All of this suggests that an issue for Macri, if he is to succeed in pushing Argentina to a new state and level of economic development, is finding ways to transform the supply-side of the economy. The goal is to ensure that production capability is strongly and sustainably rooted in the places – the localities and regions – that make up Argentina, without simple reliance on volatile commodity prices or fragile inward foreign investment.
Argentina is not alone in facing such challenges, which are also evident in the so-called developed world.
One illustration is the Okanagan, a place in British Columbia in Western Canada that has some possibly unexpected similarities with Argentina. Despite being part of a country categorized as economically developed, the Okanagan is in a process of developing and its current state is in certain respects relatively undeveloped compared to some other parts of Canada.
There has been an economically active First Nations population in the region for millennia but it is only since the end of the nineteenth century that there have been a significant number of immigrants, thus an embracing of models of market capitalism. There is currently a recognized, untapped potential for meaningful growth. Like Argentina, the Okanagan has tended to rely on agriculture and natural resources but it now appreciates that approach has its challenges. Also similarly, inward investment has figured importantly. Recently there has been emphasis on the example provided by Disney Canada, a subsidiary of The Walt Disney Company that is headquartered in Kelowna, the Okanagan’s principal city. The difficulty with relying on subsidiaries of transnational giants is finding ways of ensuring that they remain in a particular place.
To help to address such challenges, one of the public initiatives in the region has been establishment (ten years ago) of the Okanagan campus of The University of British Columbia (UBC). Through that campus, UBC is deliberately attempting to impact the supply-side of the Okanagan economy.
In agriculture, British Columbia has a globally emerging wine industry, the vast majority of which is located in the Okanagan. In partnership with KEDGE business school in Bordeaux (France), UBC has created a forum for winery owners to identify and address their strategic concerns. The aim is to enable sustained growth by shifting the industry into production of premium and super-premium wines. This is a focus on high value, intended to remove the region from competing at the low end, a wine market in which success is very difficult.
Another example is the recently established Survive and Thrive Applied Research facility (STAR). Focusing especially on high value manufacturing, STAR is intended to provide Okanagan-based small and medium sized enterprises with access to research and development laboratories. An objective is to foster cooperation on innovation between those enterprises and global corporations. The intention is to use STAR as a catalyst that draws out the benefits of working with large corporations, without making the Okanagan dependent on unstable inward investment.
To underpin the impact of such initiatives UBC has also initiated a project on the occupational structure of the Okanagan. The objectives are to understand the Okanagan’s recent occupational history, and to use that history to stimulate citizens to strategize about the region’s sustainable, long run future. The significance of this project is that it goes beyond the consideration of particular sectors, such as wine or high value manufacturing; the idea is to envision the future of the economy, which highlights the crucial importance of contextualizing each sector in the economic development of a region more broadly.
Referring back to Argentina, these examples possibly suggest an opportunity for the Macri administration: initiatives by universities in comparable parts of the world indicate the potential benefits of supporting the country’s universities so as to impact the supply-side of its economy.
Such opportunity also comes with a caveat, however. It is unknown how far Macri is committed to a neoliberal economy, and if universities are seen as a means of supporting the supply-side so as to buttress neoliberalism, that might violate their public interests mission. The explanation is simple: according to economic theory and evidence, an essentially neoliberal economy does not necessarily satisfy public interests. That can be the case for many reasons, for example because the interests of particular groups of people (maybe consumers, or employees or First Nations) are excluded from key decision-making in these economies, which then follow the narrower aims and desires of an exclusive group.
Similar reasoning also serves as a reminder for UBC, and indeed any university that is deliberately attempting to impact regional economic development anywhere in the world: if the concern is with public interests, outcomes cannot be left to the vagaries and dictates of an essentially neoliberal economy.