BUENOS AIRES, ARGENTINA METROPOLIS, NATION AND THE WORLD ECONOMY A COMPARISON BETWEEN THE 1890s AND THE 1990s

CONTENTS

NOTE

SECTION I 1 1.0 Focus and Structure 1 1.1 Scenario 1 1.2 Literature 2

SECTION II: THE EIGHTEEN NINETIES 4 2.0 World Economy, 1890s 4 2.1 Nation, 1890s 5 2.2 Metropolis, 1890s 7

SECTION III: THE NINETEEN NINETIES 10 3.0 World Economy, 1990s 10 3.1 Nation, 1990s 12 3.2 Metropolis, 1990s 16

SECTION IV: CONCLUSIONS 18 4.0 Metropolis and World Economy 18 4.1 Metropolis and Nation 19 4.2 Shifts 20

REFERENCES 22

LIST OF TABLES

Table 1 Distribution of the Population in Argentina, 1991 1 2 Distribution of Main Cities and Gross Domestic Product, Argentina, 1991 2 3 Exports and Income of Five Selected Developing Countries 1913­1992 5 4 Total Population and Population in Ten Main Cities, Argentina, 1869­1991 7 5 Slum Rent Cost, Buenos Aires, 1871­1910 9 6 World Distribution of Population, FDI, Exports and Income, 1981­1992 11 7 Argentina’s Export Sector, 1870­1992 12 8 Convertibility Plan, Economic Indicators, Argentina, 1991­1996 14 9 Rates of Employment, Activity and Unemployment in Main Cities,

Argentina, May 1987­1997 14 10 Distribution of Firms and Jobs, Argentina, 1985­1994 14 11 Share of Buenos Aires Port and Ezeiza Airport, Argentina, Exports and

Imports, 1989­1995 15 12 Population and Rate of Growth Between Censuses, Main Cities, 1950­1991 15 13 Income Distribution in Percentage, Buenos Aires, May 1990­1997 16 14 Levels of Poverty and Unsatisfied basic Needs, Buenos Aires, May 1988­1996 17

This paper is taken from a dissertation written to satisfy the requirements of study towards the award of a Master of Science at the Development Planning Unit

NOTE

When the text refers to ‘Buenos Aires’, it refers to what is technically known as the Metropolitan Area of Buenos Aires or the Greater Buenos Aires, i.e. the City of Buenos Aires (which has the constitutional status of a Province) plus its conurbation, formed by nineteen municipalities of the Province of Buenos Aires which were considered as a part of the same urban area in the 1991 Census. This same area is nowadays divided in twenty three municipalities due to the subdivision of some of them in 1995. It must not to be confused with a broader definition sometimes used, the Metropolitan Region of Buenos Aires, which includes the Greater Buenos Aires, the Greater La Plata and other neighbouring municipalities.

Billions (bn) are thousands of millions (m). The sign $ is used for Pesos Argentinos. In August 1997, $ 1.00 = U$S 1.00.

1

BUENOS AIRES, ARGENTINA METROPOLIS, NATION AND THE WORLD ECONOMY A COMPARISON BETWEEN THE 1890s AND THE 1990s

SECTION I

1.0 Focus and Structure

Since 1990, new conditions for the development of Buenos Aires have been in operation. These new conditions, under the framework of macroeconomic policy reform, comprise amongst others: one, the privatisation of many sectors of the State, including all the urban services; two, the restructuring of Argentina's manufacturing sector; three, the removal of regional policies aimed to promote the development of other regions of the country; four, a shift in the balance of trade of the country towards a more export oriented economy and five, a growing flow of foreign direct investment directed to privatisation and the more competitive sectors of manufacturing.

It seems that the basis are laid for Buenos Aires and its area of influence to yield differentials in growth vis­à­ vis the rest of the country from a new regime of accumulation. Resembling in some ways that of the end of the nineteenth century, when Buenos Aires grew as a trading hub between its hinterland and the world economy, this new regime of accumulation features agribusiness and foodstuffs manufacturing as the leading export­oriented sectors of the economy. However, the capital accumulation in the nineteenth century could be directed towards investment in infrastructure, housing, education and health, allowing wealth to trickle down and create a wide urban middle class out of the mass of the migrants. In the new ‘global’ round of capital accumulation, the regional economy does not allocate enough surplus to less concentrated forms of investment that would create a more even distribution of income, although it can be argued that it is in better conditions than the rest of the country to do so.

This paper focuses on the development of Buenos Aires in 1890 and 1990 in its two central sections, Part Two

and Part Three. Given the particular role of Buenos Aires as the place where the World Economy intersects the Nation, each period is analysed firstly from the World Economy perspective, secondly from the Nation one, and thirdly from the Metropolis perspective itself in the given period. Part One introduces the scene and gives some information about on the literature about Buenos Aires which is relevant to the subject. Finally, in Part Four some interactions between the different periods and perspectives are presented as a conclusion, with emphasis in the main issues that are present in the contemporary social and economic debate on cities. The main goal of this paper being to explore some new perspectives on the urban question from the World Economy point of view, it looks upon the dimensions of the world economy and the national state only as necessary complements to understand the urban dimension of social and economic problems.

1.1 Scenario

In Argentina, “the settlement patterns, the geographical location of human activity, especially economic ­ not only livestock farming but industries and services ­, the development of infrastructure, internal migration and immigration flows, the structure and dynamics of political and economic power, all show a high degree of concentration parallel to and symmetrical with the concentrations of nature: society has tended to concentrate in the places where nature concentrates its greatest potential. There is nothing strange or anomalous about this per se”. (Gallopin, quoted in Sunkel et alt., 1990 :35). Since the nineteenth century this place has increasingly been the pampas, the fertile temperate plain that extends approximately in a semicircle with a radius of 500 hundred miles from Buenos Aires and partly included in the core provinces of Buenos Aires, Santa Fe, Córdoba. The result of that process of concentration can be seen in Table 1.

Table 1: Distribution of the Population in Argentina, 1991 According to Census 1991 (RA 1995)

Population [1,000]

Population [%]

Area [1,000 km 2 ]

Area [%]

Core Provinces (Provinces of Buenos Aires, Santa Fe and Córdoba) + City of Buenos Aires 21,125.48 64.77 606.10 21.80

2

Rest of the Country 11,490.52 35.23 2,174.30 78.20

3

According to the same authors, environmental regions outside the pampas can be classified in three types. First, there are regions where “the size of local population exceeds the existing availability of environmental resources” (op.cit. : 38), where single crop agriculture like cotton in Chaco or sugar cane in Tucumán, or over pasturing in the Patagonian plain (see also Sawers 1997) have depleted resources beyond the limits of sustainability, causing resources to fall below what is needed to sustain the great part of the population above the poverty line. Second, there are regions which are “sparsely populated and have considerable reserves of natural resources, like the Patagonian coast or the provinces of Entre Ríos and Corrientes” (op.cit. : 39). Third, there are regions that have reached a certain equilibrium, either because the population was reduced, like in the case of the Northwest, which is a case of ‘negative equilibrium’, or because the inflow of population and resources has kept pace with a sustainable development of natural resources, achieving a ‘positive equilibrium’ like in the case of the irrigated areas of Cuyo and Rio Negro. However, other sources (Sawers 1997) cast a shadow of doubt over the sustainability of these irrigated areas, mainly because of the increasing salinisation.

Finally, and in spite of its environmental problems, the carrying capacity of the pampas is far from being reached. Plenty of land and water is available both for agriculture and urbanisation, and with more careful management, erosion and degradation of water and soil can be avoided. Comparable plains, like the Po river plain in Northern Italy, sustain a population many times the size of Argentina’s population. Agricultural GDP per hectare of arable land is nearly five times higher in Italy than in Argentina, $ 2445 per Ha in Italy against $ 507 in Argentina (UNCHS 1996). On the other hand,

two thirds of Argentina's land, which are semiarid, face desertification, salinisation, erosion or deforestation. These environmental factors also influence the urbanisation process, which is itself more sustainable in the pampas, due to temperate climate, easily available drinking water, plain land, and easy access to the navigable rivers and the sea.

Therefore, the pattern of urbanisation followed the same path as the occupation of the territory. As can be seen from Table 2, more than half the population living in cities with more than 100,000 inhabitants was living in Buenos Aires, with a pattern of distribution of the main cities which proportionally follows the distribution of the population already seen in Table 1. The distribution of urban per capita income follows the same pattern, as it is higher than the average in Buenos Aires, around it in the core provinces of Buenos Aires, Santa Fe and Córdoba, and below the average in almost all the rest of the country.

1.2 Literature

Ezequiel Martinez Estrada (1957), who may have been the brightest critic of the inequities between Buenos Aires and the provinces, coined the metaphor ‘head of Goliath’ to refer to Buenos Aires. What by the 1930s and 1940s was the concern of `ensayistas' and political writers, and hence a political issue, in the 1950s and 1960s began to concern the social sciences, and hence it turned to be a scientific and technical issue, something that could be tackled by means of objective procedures, i.e. by means of government policies and not only by political action. In a semantic twist, the problem of Buenos Aires' primacy, that Martinez Estrada expressed in `the head of Goliath', a many­ sided metaphor, began to be called `macrocephalia', the description of a

Table 2: Distribution of Main Cities and Gross Domestic Product, Argentina, 1991 According to Vapñarsky (1995) for population and IDH (1996) for Gross Domestic Product (GDP) Cities with population over 100,000 and provincial capitals

Population 1991

[1,000]

Number of Cities

Average Population

[1,000]

Population Growth

1980­1991 [%]

p.c. GDP/ Avg. p.c. GDP

1991

Buenos Aires 11,300 ­ ­ 11.9 1.12

Core Provinces (excluding BA) 4,286 7 612.29 13.1 0.94

Rest of the Country 4,661 19 245.31 26.1 0.75

4

Total 20,247 26 344.11 16.1 1.00

5

pathological illness, for which a prescription follows the diagnosis, and afterwards, healing or death may take place.

It is interesting how the issue of primacy and the regional question, born as a theoretical problems in Latin American development planning (Borello 1992), is thoroughly analysed in early writings of 1960s and 1970s, while later it turned to be a common place in literature. Rofman (1974) does not take for granted the issue of the negative consequences of primacy. Moreover, he makes a critical review of the concepts of region, regional unbalances and inequalities, and of the causal processes involved, making a review of alternative theories about the subject, and pointing out more questions than certainties. Most of the early studies similar to Rofman’s relied heavily on a neo­ marxist approach with strong emphasis in the theory of internal colonialism to explain the historical process that causes spatial differentials in the process of capital accumulation and reproduction and the consequent reallocation of labour (see Rofman and Romero, 1973). In hindsight, this can be seen as a rather mechanical extension of the dependency theory, but it cannot be said that it lacked a critical perspective. Lately, Coraggio (1987, 65) criticised the extreme generalisation of the debate on the regional question. He pointed at the recurrent appeal to some topics to explain diverse realities. According to him, the topics of: a) excessive' spatial concentration or `macrocephalia', b) regional `inequalities', c) political `centralism', and d) geographical `dualism' between rural/urban and modern/traditional have been widely abused as explanatory means without neither further theoretical elaboration nor empirical research.

This lack of criticism about the contradictory characteristics of the process of urban growth spread from the empirical research to the policy assumptions, and in its most simplistic version, to the political discourse. Well into the 1990s, the topic of the negative effect of urban concentration is present in the theoretical background of mainstream literature. Vapñarsky (1995) analyses the demographic evolution of the urban system in Argentina, showing the increasing trend towards a more even distribution of medium­sized settlements. However, he regrets the fact that the current distribution of the population is to a great extent an established fact unlikely to substantially change. Comparing it to the American urban structure, he assumes, by contrast, that the differences of Argentina partly explain the failure of the latter to develop as a more democratic state (op.cit. :251). The negative effects of the primacy of Buenos Aires are assumed, and it is regarded as an inefficient city in terms of environment and productivity, apparently because of being oversized.

Pírez (1994) gives a more fair picture of the role of Buenos Aires, although casting some shadows over its future. Inevitably, he states that there is in Argentina, from a territorial perspective, “an urban system which is ‘unbalanced’ by the existence of a prime city” (op.cit., p156, translation is ours). In Clichevsky, Herzer, Pírez, Satterthwhaite et alt (1990 :498), and as a major conclusion and policy prescription for all Latin America, it is recommended to “Reallocate the population in the region”, since “a better distribution of productive activities would improve the urban quality of life”, provided that urban services are delivered by the State. According to the authors, the investment needed would be comparatively less significant than in metropolitan areas.

This perspective is increasingly marginal. The removal of any policy aimed at regional development has been made exclusively by bearing fiscal considerations in mind, and the results have not come without trouble. However, the fact that regional policies have been blown away by structural adjustment, does not hide the fact that they were already a failure, a fact addressed not only by [M]Neoliberals, but also by Marxists, who pointed that the kind of policies implemented were a subsidy to capital accumulation or merely a direct spoils of the State brought by a clientelistic bourgeoisie.

Whatever the multiple causes for the development of a city that bears a substantial part of the population and the productive activities of a given country, there is no substantial evidence to assert that this fact has by itself any negative effects on welfare. Many authors have, first, discarded the possibility of the theoretical determination of an optimal city size. (Richardson 1972), and second, they have argued that far from a burden, the large cities are in fact the engines of economic development that generate fiscal resources that are transferred to the more backward regions (Davezies and Prud’homme 1994). In its last Global Report (UNCHS 1996) the United Nations Centre for Human Settlements took a new perspective on the advantages of cities as instruments of human development discarding concepts like ‘overurbanisation’ and opening new debates on the positive role of cities, including that of the largest metropolis.

Since the 1980s, Latin American urban research has specially focused on the problems of cities apparently caused by structural adjustment and underdevelopment. According to Valladares and Prates Coelho (1997), the main themes of regional urban research have been related to issues of poverty, informal sector, social movements, housing for the poor, local government, etc. According to Rodríguez A, Espinoza and Herzer, as quoted in Valladares and Prates Coelho (op.cit.), these themes account for more than half of the books

6

and articles published in the same period in Argentina. As for Buenos Aires, a sample search of 413 references (Garay and C Rodríguez, 1997) shows the predominance of the same themes in the urban research on Buenos Aires. Both sources reflect the lack of research from another perspectives, like for example the evolution of the urban economy and the impact on cities of structural changes in the world economy. This paper tries to explore some of these less known themes, as they seem to be of increasing interest to define the future and prospects of Buenos Aires. In doing so, given the extent and the complexity of the issues considered, it tries to set a perspective and to formulate some questions for further research. As it nearly always happens when old problems are seen under new perspectives, questions arise. Therefore, this paper casts more doubts than certainties.

SECTION II: THE EIGHTEEN NINETIES

2.0 World Economy, 1890s

One of the main underpinnings of the thesis of globalisation looks back to the extraordinary period of growth that the world economy knew in the last century, when world trade soared as output and consumption expanded. This period is usually regarded by Neoliberal economics as the example of the positive effect that deregulation, free trade and free enterprise can have on economic development. Summarising the classical view, as each country or region profits from its comparative advantages them ­ being either raw materials or manufacturing ­ trade and output expand, and everybody is better off. The paradigm of prosperity through trade in the golden age of the Pax Britannica is still a very strong memory in Argentina, which achieved important rates of economic growth in that period. In fact, one of the reasons why Buenos Aires challenged Spain during the independence war, was to be free from the monopoly on trade that Spain imposed to the Colonies. As early as in 1823, professors in the newly founded University of Buenos Aires were teaching political economy with recently translated texts of Ricardo and Mill (Hobsbwam 1997a : 291). Nonetheless, the issue of the incorporation of Argentina in the sphere of the modern world economy was delayed until 1860, when the country began to take substantial part in the world trade. It did so as a response to the rapid industrialisation of the British economy, and later, to that of the European powers.

The coupling of the Industrial Revolution in Europe and the primary production in Asia, Africa and Latin America is well known. However, the role of the temperate regions of the Southern Cone, Australia and Canada, which were mainly providers of foodstuffs was rather different from that of other regions of the world

that were specialised in providing either industrial inputs, like rubber, copper or cotton, or new products for domestic consumption, like sugar or cocoa. The temperate regions developed keeping pace with a growing demand fuelled by a rise in domestic consumption of an even larger urban population in the industrial countries, thus replacing domestic agricultural

7

production in Britain to supply domestic demand for foodstuffs in the industrial countries. As the labour force was drawn to the cities in Britain, agricultural production collapsed : wheat acreage shrank two thirds between 1875 and 1895 (Hobsbwam 1997c : 36). Although it is widely accepted that Britain used its imperial power to appropriate the greater part of surplus from the peripheral economies, this was made at a cost : “free trade meant [for Britain] the readiness to let British agriculture sink if it could not swim” (op.cit. 40), something that Britain (or the European Union) would not repeat after the World Wars, when it paid a high cost for its dependence on imported foodstuffs.

The development of Argentina in the seventy years spanning from 1860 to 1930 has been accounted on repeated occasions by economic historians who highlighted the relevance for the world economy and for the country of the opening up of the new agricultural frontier of the pampas. Analysing the 1873­1920 trend period in the world economy, Rostow (1978 : 163) poses that “the economic attractiveness of the Argentine pampas caused the break in trends”, from the recession of 1873 to the boom of the 1880s. “The central feature of this story is the expansion and then deceleration of wheat output in the United States and then the compensatory expansions of in Argentina, Canada, Australia and Russia” (Op.cit. : 168). As a result, world trade in primary products trebled between 1880 and 1913. (Hobsbwam 1997c : 50).

Key factors were not only trade and investment, but also unrestricted migration that nourished economic growth in the temperate regions at the pace of the expansion of the agricultural frontier. Only from Europe and between 1820 and 1910, 30 million migrated to the United States, 3,6 million to Argentina, Uruguay and southern Brazil and 2 million to Australia and New Zealand (Hobsbwam 1997c). Trade was central for the growth of the world economy. It was more important between primary and manufacturing producers than between industrial countries, as a result of the consolidation of the spheres of political control in the South by the industrial countries, but also because of the great value attached to primary production exports. For example, by 1913 Asia and Africa provided more exports to the world economy then the US or the UK. In the same year, Latin America’s share of world exports was 8,3%, while US and Canada was 14,8% and the UK was 13,1%. (Knox and Agnew 1997). As it can be seen in Table 3, since the First World War the economic importance of major developing countries has diminished.

This booming economic process relied on agricultural production in the temperate regions as a complement of the industrial countries, but was essentially urban in its

8

Table 3: Exports and Income of Five Selected Developing Countries, 1913­1992. As a percentage of G7 Exports and Income. G7 : Canada, France, Germany, Italy, Japan, UK and USA According to Maddison, 1995

1870 1913 1950 1973 1992

Argentina, Brazil and Mexico

Exports GDP

20.73 4.79

23.77 5.25

22.85 5.63

17.83 2.44

13.52 4.16

China and India Exports GDP

8.12 17.66

5.26 11.55

3.16 8.80

2.26 2.68

3.46 5.50

place of command and accumulation. “Migration and urbanisation went together, and in the second half of the nineteenth century the countries chiefly associated with it (the United States, Australia, Argentina) had a rate of urban concentration unsurpassed anywhere except in Britain and the industrial parts of Germany” (Hobsbwam 1997b : 231) Thus, in the case of Argentina and Britain, there was not a rural economy trading vis­à­vis an urban one, but two urban based economies. Insofar as the increase in agricultural output was matched by an increase in productivity and did not lead to the formation of a peasantry, it grew more as an urban­based system. From the towns scattered along the lines of the railroad, the productive forces were deployed in the pampas that remained mostly inhabited.

The railroad and the telegraph connected the farmland to the port, and from there, to the rest of the world. Any place in such condition was part of an unprecedented global network. It can be said that a town and railroad station in the pampas was more a ‘global’ productive site than, say, any city in peripheral Europe. In it there were Italian farmers, Catalan merchants, French surveyors, Polish prostitutes and English rail workers. The railroad capital was British, the land was owned by local ‘estancieros’ (that were likely to live in Buenos Aires or Paris) and the farming machinery was made in the United States. At the centre of the web there were port cities like Buenos Aires, where millions came and went every year at the pace of the rhythm of the inflow and outflow of capital and commodities.

2.1 Nation, 1890s

Since Buenos Aires emerged as a smuggling port in the eighteenth century, the politics in the then territory of the Viceroyalty of the River Plate can be seen as the struggle between Buenos Aires and the provinces, i.e. between the port and the hinterland. After the Independence, the centripetal forces Buenos Aires could not retain the entire territory of the viceroyalty. Three territories spun off: Bolivia, Uruguay and Paraguay. The rest of the provinces did not, so they became part of what after a series of civil wars is now Argentina. Like in many other Latin American

countries, two parties were divided by the opposition between tradition and modernity, colonial heritage and enlightenment, urban and rural. In Argentina it took the form of a conflict between Buenos Aires and the provinces, and it was economically expressed by the struggle between the professedly European merchant port city and the rural, self­reliant provinces.

After the pacification of the country in the 1860s and the federalisation of the City of Buenos Aires in 1880, this conflict came to an apparent solution under the rule of a federal Constitution that could secure a peaceful and equitable balance of power. It has to be noted that until 1880, there was a relative balance between Buenos Aires and the provinces in terms of population and wealth. Moreover, between 1854 and 1860 Buenos Aires refused to join the Republic and proclaimed independence. During this period, the port city of Rosario was created, and the economy of the Republic developed quite well without Buenos Aires and its Province.

Buenos Aires was the engine of a steep growth. In the 1880s, Argentina’s annual GDP per capita was an estimated £24 per capita while Canada’s was £36, France’s was £31 and Germany’s £25 (Di Tella and Dornbusch, 1983). In spite of the 1890 slump, prospects for the Argentinean economy were favourable, as we have seen above, due not only to the conditions present in the international market for foodstuffs, but also because of three main internal conditions : a) the advantageous exchange rate for exports that kept local costs under falling commodity prices, b) extensive land reserves for agricultural production and c) the completion of railway construction under the depression. Between 1890 and 1892 railway track length was increased by a quarter. Furthermore, the cultivated area doubled from 2.4 million to 4.9 million hectares between 1888 and 1895. From this year on, Argentina entered twenty years of expansion at an average annual rate of 6% of the GDP, in spite of two world trade recessions. Moreover, between the 1895 and 1914 censuses population doubled, soaring from 3.9 to 7.8 million. (Rock 1986).

9

The debt crisis of 1890 forced Saenz Peña’s government to negotiate the external debt or face default. Promptly, the British banks settled a moratorium with the government (Ironically, Baring Brothers was then the main bank facing bankruptcy due to heavy lending in the ‘emerging market’ of that time) As a means of controlling foreign debt, the federal government assumed responsibility for debts of the provinces, but in exchange for the transfer of the right to collect several local revenues and taxes. “The crisis of the early 1890s thus released new centripetal impulses and reinforced the concentration of power in Buenos Aires, which had been a salient feature of the period since 1860” (op.cit., p61).

At this point, differentials between the provinces of the core and the rest of the country began to take off. Population in the core provinces doubled. The Province of Buenos Aires grew from 0.9 to 2 millions, Santa Fe from 0.4 to 0.9 and Córdoba from 0.35 to 0.74. In the same period, La Rioja barely grew from 79,000 to 83,000, while Jujuy did the same from 76,000 to 80,000 (Rock, op.cit.). As a result, demographic and economic balance shifted from the Northwest to the pampas. The former (Catamarca, Tucumán, Santiago del Estero, La Rioja, Salta and Jujuy), that during Spanish rule were the richest and more populated, saw how their share of the population plummeted from 29% to 13% between 1869 and 1914 (Díaz Alejandro, 1970). Local economies were badly hit. In La Rioja, employment in the textile industry decreased from 17.4% in 1869 to 4.6% of the active population in 1914, since local industries could not compete with British imports in supplying the growing population of the Pampas region (Sawers 1996, p25). According to Scobie (1988) the rest of the country outside the Pampas was not more developed at the end of the nineteenth than they were in the seventeenth century, with the exception of Cuyo and some provincial capitals.

The core provinces’ growth was nourished by migration, at a rate of a positive balance of 50.000 immigrants per annum between 1890 and 1904, when it increased to more than 100.000 per annum. In 1914, half the population of Buenos Aires was foreign­born ; the same proportion was held in Rosario and Bahía Blanca, two newly founded port cities in the pampas region. Foreign migrants were 60% in Santa Fe and 25% in Cordoba, but less than 10% in the rest of the country with the exception of Mendoza. (Rock, op.cit.). Although at the beginning many migrants worked in agriculture, after a while a great part of them settled in the city, were they engaged in all sorts of trades, from building to craftsmanship and early manufacturing.

However, the aspiration of the Generation of 1880 for a Republic of 100 millions was ­ and still is ­ far from being fulfilled. Applying an European yardstick,

European observers saw a population of 8 million in a territory the size of continental Europe between the Mediterranean, the Baltic and the Danube, unevenly concentrated in the coastal area. For the rest of the twentieth century, one of the central issues would be how labour and capital could

10

be spread more evenly. In 1946 Ezequiel Martínez Estrada wittily pointed out that the problem was not that the head was big, but that the body was too small (Martínez Estrada 1957). The primacy of Buenos Aires, which during the nineteenth century was a political issue, had became also a social and economic issue, and since then and up to the present, a national question.

Although during the period of economic growth the provinces' ruling classes where overwhelmed by the wave of relative progress that spilled over from the port and reached the provincial capitals (Scobie 1988), then the tensions arising from a divergent path of development raised. While there was a gap in development between the core and the rest of provinces, expectations were high on the power of the national economy to close it sooner or later, as even the more backward provinces were drawn into the process of modernisation. At that time, there was no reason to think that the process of investment, labour force inflow, and capital accumulation through primary exports (mainly meat and wheat in the pampas) could not be replicated using the natural resources of the rest of the provinces: minerals, cotton, sugar cane, etc.

However, things were not so easy. For the positivism of the Generation of 1880, progress had no limits and that of Buenos Aires could not and would not be separated from that of the country, and even in the case of a delay, sooner or later the rest would catch up. As Table 4 shows, the process of concentration of national population in Buenos Aires that was triggered in the last century apparently reached its peak between the 1950s and the 1980s. However, if measured against the benchmark of the urban population in main cities, thus offsetting the effects of the process of urbanisation of the population, it shows a stable share for the extent of the records available, with a peak in 1914. It suggests that the conditions for the differential development of Buenos Aires were given very early.

The period that spans between the 1930s and the 1980s will not be extensively discussed here, which was characterised by the implementation of inward looking development policies. Although it is often asserted that Argentina followed an import substitution industrialisation strategy between the 1930s and 1970s, this period was marked by dramatic changes in policy (di Tella 1989). However, some facts have to be underlined. First, Argentina failed to keep pace with the growth of the developed economies, a fact extensively discussed in the literature on economic development (See for example Rostow 1978). Second, a wide middle class developed, supported by an early welfare state. These acquired rights of a mainly urban society to certain quality of life standards, and the unwillingness to lose them would be place of determinant in the process of structural

11

Table 4: Total Population and Population in Ten Main Cities, Argentina, 1869­1991 According to Vapñarsky and Gorojovsky (1990) and Vapñarsky (1995)

Ten Main Cities : Cities with a population above 100,000 in 1947 (Buenos Aires, Rosario, Córdoba, La Plata, Tucumán, Mendoza, Santa Fe, Mar del Plata, Bahía Blanca and San Juan) Population in Thousands

1896 1895 1914 1947 1960 1970 1980 1991

Buenos Aires 181 671 1,973 5,150 6,750 8,450 9,950 11,300

10 Main Cities 279 973 2,734 7,425 9,795 12,387 14,836 17,195

Total Country 1,737 3,954 7,885 15,984 20,014 23,364 27,064 32,370

Bs As / 10 Main (%) 64.9 69.0 72.2 69.4 68.9 68.2 67.1 65.7

Bs As / Country (%) 10.4 17.0 25.0 32.4 33.7 36.2 36.8 34.9

10 Main / Country (%) 16.1 24.6 34.7 46.7 48.9 53.0 54.8 53.1

adjustment that followed. Third, although there was a change in the pattern of development, and a shift in the output towards manufacturing and later to services, trends in spatial concentration did not change. As a result, scarce investment was allocated in places were existing fixed assets and skilled labour force provided optimal location economies. These self­reinforcing factors drew more migration to the core provinces and Buenos Aires, this time from the rest of the country and the neighbouring countries, reasserting the widening development gap. Great efforts were made to diminish regional imbalances following a model of development that emphasised planning and state intervention, but as this period ended, the results were not clear.

2.2 Metropolis, 1890s

As a result of what has been seen above, since the decade of 1860s the city experienced there was an extraordinary increase in population and wealth. (For what may be the best analysis of the city history of this period, see Scobie 1974). Consequently, in 1910 when the Centenary of the Mayo Revolution was celebrated, Buenos Aires was a completely different city. From the Great Village of the 1850s, it had multiplied its population and its wealth and was transformed in the second most important city of the Eastern Atlantic after New York. The city grew in extension and population, but it also developed many new features: an artificial port, railroads, subway, parks, tall buildings and tree lined boulevards. It was a busy commercial and banking centre and had a thriving cultural life.

Moreover, thousands of immigrant families were gradually incorporated in the `melting pot' by means of a highly developed public education system.

Buenos Aires’ economy was developing and growing fast in a global economy, and was doing so by means of

developing a manufacturing only as a by­product and not as the leading sector. It grew just by being specialising in foodstuffs exports and importing nearly all manufactured goods. In that sense, and for that time, it was a clear demonstration of the principle of comparative advantages at work. However, how came that it did not develop as an isolated trading post in an enclave economy? Unlike other peripheral economies based on tropical crops or mining, to exploit the agricultural wealth of the pampas, intensive labour and capital were needed. Agriculture and the building and management of railroads, ports, housing and urban works were all labour intensive activities. Even cattle rearing, traditionally dominated by the nomadic gauchos, incorporated new skills, like wire fencing, which was performed exclusively by ‘gringos’. This unskilled workers were complemented by highly skilled ones: farms, railroads, power stations, ports and ships had to be managed, accounted for, administered and maintained. An army of technicians, engineers and clerks was needed. For example, the meat packing plants (‘frigoríficos’) used the recently developed compressed gas refrigeration powered by electricity. Both were by that time high technologies and required a highly skilled labour force for that time, like for example electricians and mechanics. A part of this

12

skilled labour force returned to Europe, but many remained in the country.

All this population with growing incomes had to be supplied for, and commerce expanded as the white collar migrant’s or the literate peasant’s preferred occupation for. It also expanded to supply rural areas, where the mass of migrant workers for the harvest had to be supplied with consumption goods and farmers with capital goods and inputs. The distribution chain of imported manufactures was highly developed to reach any grocery store (‘Ramos Generales’) in the pampas, since at the time, even the most basic manufactured goods were imported. Furthermore, as commerce progressed, capital accumulated in the city overflowed in the countryside in the form of land acquisitions by the urban bourgeoisie, which then began to take over the old landowner bourgeoisie. As a consequence, the former began to shift profits from agriculture to the urban economy. Simultaneously, capital was diverted to early manufacturing, specially textiles, food and beverages and metal manufacturing. Public administration was reserved for the sons of native families, but the daughters and sons of illiterate migrants promptly climbed the social ladder as teachers or professionals trained in the free public secondary and university education.

It has to be noted that all foreign trade which sustained the economy was going through Buenos Aires in one way or the other. Migration also arrived to the port of Buenos Aires. That meant that it was a cosmopolitan society, with strong cultural links to Europe, specially through the activity of the immigrants cultural and social associations. The inflow and outflow of temporary workers going to work in the wheat harvest passing through the port was only second to that of the immigrants. For example, between 1910 and 1913, gross immigration reached 1.14 million, but gross emigration reached a substantial 0.5 million. There were some years, like that of 1891, when migration flows reversed to an emigration of 30,000, leaving temporary negative balances for the country (Díaz Alejandro, 1970).

The social and economic impact of these flows of permanent settlers and temporary workers was dramatic. It is important to point out that few migrants were already hired when they reach the port. They have to find their way around and a job in the city or the countryside, usually through family networks. Furthermore, the network of migrant families implied a flow of petty capitals and savings from and to Europe, to invest in a shop or a farm, or to enable more members of the family to move in either direction.

A measure of the social and economic impact of immigration in the city, and of the rapid social mobility

the migrants experienced can be assessed by looking at the immigrant’s share of relatively skilled jobs. For example, in 1895, 92% of the tailors, 84,4% of the mechanics, 89% of the shoemakers, 85% of the blacksmiths, 86% of the carpenters and 89% of the masons were foreign born. As an average, 72% of the labour force was foreign born, and of a total population of 665,000, 305,000 were employed, giving an employment rate of employment of 45%. (Scobie, 1974). In 1914, masons were 2.29% of the labour force, the largest group amongst the manual workers, while commerce with 6.75% was by far the largest group of all the labour force. 61% of the commercial firms where owned by foreigners. At the same time, 70% of all clerical jobs where done by foreigners. (Hardoy and Gutman 1992). It has to be noted that for most of them these jobs represented an opportunity to set up their own shop which they lacked in Europe, since many went to Argentina as apprentices to find there a labour market where their skills were scarce. To attract such numbers of skilled labour force from Europe, wage differentials were to be substantial, and low unemployment was achieved by the flexibility of a labour force that could easily return to Europe if unemployed (Díaz Alejandro, 1970, p27).

However, the long term trend was an upward movement of the whole social pyramid, raising as the leading primary export sector grew and expanding in its base itself nourished by migration. As income raised, domestic consumption and investment expanded the demand of highly skilled workers. This dynamic demand was supplied with further migrants but also by upgrading the existing labour force. In fact, wealth was not trickling down, but society as a whole was climbing up the social ladder. The building industry was a visible proof of this process. From the austere one­storey colonial buildings that were still the norm in the 1880s to the modern multi­storey buildings of the 1920s, skills and technologies in use multiplied. Laminated iron, electricity, central heating, elevators, piped water and sewage were incorporated, but also the traditional skills of the masons and carpenters were upgraded by the demand of a more refined decoration and craftsmanship. This in turn trickled down to the common single house, known as ‘casa chorizo’ which featured some of these technological advantages. (See Scobie 1974). Capital flowed to the building industry as profits soared, and the expansion of the added value in the building industry fostered the growth of entrepreneurial brick layers that turned to be contractors. If they were successful enough they could became investors. Traditionally, those in the building trades were Italian, but the same expansion can be verified for many sectors and communities, like the Jews in garments, the Lebanese in commerce, the Spanish in bars and restaurants, etc.

13

The growth of the city in this period was dramatic, but even more dramatic was the fact that the urban economy grew at a pace rapid enough to raise at the same time incomes and living standards without sever bottlenecks. The history of water and sewerage in Buenos Aires provides a case in point to see how national prosperity was concentrated in Buenos Aires. Between 1869 and 1871, when Buenos Aires had 200,000 dwellers, it was hit by typhoid and cholera, epidemics related to the lack of sanitation. The investment in sanitation was multiplied and fifty years later, in 1925, almost all the population, which had increased tenfold by that time, was covered by piped water and sewerage (Brunstein 1986). The national water company was completely funded by the National Treasury, up to a point when a third of its expenditure was going to that company. Since the Treasury’s main revenue were Customs, it can be concluded that the external sector was financing the urban development, specially that of Buenos Aires. The fact that sanitary services are a key factor in the health of the population and thus in the reproduction of the labour force was understood very early and it was tackled by the State during a period of dramatic economic growth.

Although it can be argued that this growth was financed by the appropriation of surplus from the export sector, there is evidence that not all the surplus was invested in the city via redistribution by the state or appropriation by the ruling class, but also that there was a substantial appropriation of the rent by the households in the lower strata. Platt (1986) argues that although part of the vast resources needed invest in the developing Buenos Aires of the turning of the century were coming from foreign (essentially British) loans, foreign direct investment, and transfer from the provinces, a great part of the actual investment was coming from Buenos Aires' local economy. According to this view, while the foreign investment was allocated to the more visible works (the Puerto Madero, the railroads, etc.) and fiscal federal resources were allocated directly to the city, like in the case of the water and sewerage system, or transferred to Buenos Aires' Municipality, the bulk of the investment allocated to pavement and housing was raised from the own private and public resources of the city's booming economy.

The housing needs of the growing population was met entirely by small and medium sized private investment. Houses multiplied five times from 20,858 in 1869 to 111,135 in 1909, (only within the boundaries of the Capital Federal), when 82% of them where made of brick and mortar. (Platt, op.cit.:5). How did it caught up with the population growth is difficult to assess, but the ratio of population to houses modestly increased from 9 to around 12, due to the densification of the urban fabric. (Census at that time registered ‘houses’ as

the only category for housing, referring to an independent building in a parcel, regardless the number of homes or housing units it contain, that usually housed an extended family). Ranging from ‘conventillos’, speculative slums for the newly immigrants, to flats rented by the new middle class of white collar workers, housing investment was the main form in which surplus was accumulated and reproduced.

14

Many immigrant nuclear families adopted this strategy of accumulation, first by purchasing land, then by building a house for the nuclear family that later grew to house an extended family, and finally to produce a rent by leasing an upstairs flat or a shop in the front.

Pavement started to grow from a very few streets in 1893, and by 1910, 60% of the streets were paved, much of them with costly granite cobbles. This was paid by the municipality through the direct contribution of the proprietors, or by floating loans on the local financial market. This was possible due to the growth of the housing values, enabling the municipality to raise more taxes and direct contributions. The amount and significance of the capital accumulation in urban infrastructure and housing and is unknown. Great part of the housing and infrastructure stock built between the 1890s and 1930s is still in use. Somehow, Platt estimates that 90% of the physical investment in the city in the period of 1880­1914 was met with private and public local resources. This figure is matched by a 10% investment coming from abroad and from the federal state. As a result of this building boom, after the 1890s housing costs began to fall, as seen in Table 5.

Simultaneously, there is evidence that living conditions in slums, or ‘conventillos’, worsened in this period. On the one hand, according to the available data the rate of occupancy in slums increased from 2,2 in 1878 to 2,6 in 1883, 2,5 in 1890 and 3,1 persons per room in 1904 (Scobie, op.cit.). In the other hand, although there are no matching years for both series, there is evidence that the number of people living in slums decreased from below 22% in the 1890s to 15% in the 1900s and less than 10% in the 1910s, due to the rapid pace of development of the land market and increasing housing construction in the `barrios' of Buenos Aires, which may have been the reason for the reduction in rent prices. (Scobie, 1974). The increase in the number of people per room at the same time that housing prices decreased, suggests that the better off amongst the working class rapidly fled the slums, leaving the poorest behind. As seen above, housing was built with local investment and mainly through domestic savings, since credit for housing was scarce (Hardoy and Gutman 1992).

Table 5: Slum Rent Cost, Buenos Aires, 1871­1910.

Number of daily wages needed to pay a monthly rent for a room in a `conventillo' (slum) Based on data from Scobie, 1974.

1871 1885 1890 1901 1910

Daily Worker 3.3 7.0 13.3 14.5 10.0

Mason 1.0 3.7 6.7 7.3 5.7

15

16

At the same time, education levels substantially improved, in spite of the rapid expansion of the population. The rate of children attending school in Buenos Aires in 1869 was 50%, 62% in 1895, 72% in 1914 and 86% in 1947, with an almost equal distribution between boys and girls. (Díaz Alejandro 1970). In the span of a human life or two generations, in the sixty years between 1870 and 1930, a settlement of 4 million people, most of them born somewhere else, was created nearly from scratch, out of a town of 200,000. In 1947, 28% of the population of the Federal District was still foreign­born, and may be much more than half was a first generation Argentinean. At the time of the Great Depression in 1929, most of the population of Buenos Aires was healthier and better educated and housed than their relatives in Spain or Italy. And as it shall be seen, ‘porteños’ were also in relative historical terms wealthier and more cosmopolitan than they are now.

SECTION III: THE NINETEEN NINETIES

3.0 World Economy, 1990s

During the first part of the Short Twentieth Century, between 1914 and 1945 (Hobsbwam 1997d), conditions for the development of the world economy were featured by the restrictions imposed on free trade and migration and the wave of protectionism that followed the First World War and the Great Depression. Krugman (1996) comments “Politics killed that first Global Economy”. As a response, after the Second World War the Allies set up a new set of conditions for the world economy, in order not to repeat the experience of the 1920s and 1930s. The world saw after the Second World War the longest and most intense period of economic growth, that lasted until 1973. Lipietz (1993 : 6) defines the so called Fordist compromise during this period as featuring a regime of accumulation matching greater mass production with higher mass consumption. The mode of regulation consisted in social legislation to sustain wage levels, welfare state to sustain the proper level of reproduction of the labour force, and credit money supplied as the economy demanded.

During the 25 years of growth in the industrial countries under the Fordist compromise, the Third World (as the South was already known) also grew at unprecedented rates, although it failed to catch up with the core industrial countries. After the end of this period, it was clear that the developing were not so easily taking off. A change in paradigms and policies took place since the late 1970s at the level of the core countries’ governments and international organisations, towards what Lipietz (op.cit.)

has called the ‘liberal productivism’. For the purposes of our comparison, it is relevant to see how the same author compares this new phase of capitalist development with its predecessor of the nineteenth century : “It is important to stress, however, a major difference between nineteenth­century liberalism and contemporary liberal­productivism. The former tried to ensure the happiness of all by encouraging the citizen to seek individual enrichment. It was an ‘utilitarian’, ‘hedonistic’ liberalism, where the goal of technical progress and free enterprise was happiness through the enrichment of all. However, its language has been stripped of its appeal, reduced to the cold necessity of the nature of things. Deregulation, free trade, technological change have come to dominate, like three mice chasing their tails, running round in a circle whose illogicality simply shows how impossible is to stop. To the question ‘Why do we really need free trade and free enterprise ?’, the answer is: ‘To modernise the productive system’, and to the question: ‘Why modern­ ise the productive system ?’, the reply is ‘To cope with international competition’.” (Lipietz, op. cit. p. 32)

Another consequence of the change in paradigms is the development of the concept of ‘globalisation’, i.e. the growing integration of national economies in a global, highly interdependent economy. For all the parlance about globalisation, there is certain scepticism about whether or not the current period is really unprecedented. Hirst and Thompson (1996 : 49) argue that “the level of autonomy under the Gold Standard up to the First World War was not so much for the advanced economies as it is today. This is not to minimise the level of that integration now, or to ignore the problems of regulation and management it throws up, but merely to register a certain scepticism over whether we have entered a radically new phase in the internationalisation of economic activity”. Paul Krugman (1996 : 9) adds to the sceptic’s view : “the world is not as interdependent as you may think : countries are nothing at all like corporations. Even today, for example, US exports are only 10 percent of the value­added in the economy (which is equal to GNP). That is, the United States is still almost 90 percent an economy that produces goods and services for its own use”.

There is enough evidence that shows that the role played by the developing countries in the world economy is not negligible, although it is, first, less significant in relative terms than it was a century ago ; and second, highly concentrated in the so called Newly Industrialised Countries (NICs). In terms of Foreign Direct Investment (FDI) flows, and according to Hirst and Thompson (op. cit.), during the 1980s the US, the EU and Japan accounted for 75% of FDI, having only 14% of the world’s population. The ten most important developing

17

18

Table 6: World Distribution of Population, FDI, Exports and Income, 1981­1992 Percentage According to Hirst and Thompson (1997)

Population 1992

FDI 1981­9

Exports 1992

GDP 1970­9

GDP 1980­9

US,EU + EFTA and Japan 14 75.0 69.0 67.35 69.6

Singapore, Mexico, China, Brazil, Malaysia, Hong Kong, Argentina, Thailand, Egypt and Taiwan 29 16.5 14.0 7.34 7.29

Other Countries 57 8.5 16.1 25.31 23.11

countries in terms of trade, as can be seen in Table 6 accounted for 16,5% of global FDI, having 29% of the population. (Hirst and Thompson, 1997 : 68). As for Argentina, it has to be noted that FDI going to Argentina in 1992 ($ 4,179 m) was comparable to that going to Indonesia ($ 4,695m) or Mexico ($ 5,366m), and more than that going to Thailand ($ 2,116m) or Brazil ($ 1,454m) (World Bank 1994). However, more than a half of the FDI inflows to Argentina are directed to domestic oriented activities, which is the case of the huge investments in the privatisation of public utilities, and not to export oriented manufacturing like in the Asian NICs.

However, the existence of the NICs is one of the key elements of the globalisation thesis, since it can be argued that as some countries follow the path of development, they began to be incorporated in the mainstream of the world economy, which is specially the case of the export­led Asian NICs, like Taiwan or Korea. Whatever the conclusion and the prospects, the fact is that although their output and income remain marginal in most cases, the world distribution of industrial output has shifted, at the same time that the developing world industrialised. By the end of the 1970s the developing countries were exporting more manufactures than raw materials, and on the contrary, the developed had increased its primary exports, that amounted to more value than that of the developing (Harris 1986 : 29).

As for the insertion of the Latin American NICs in the world economy, it is today somehow different to that of the Asian NICs. Latin American countries had in 1992 a substantially lower exports to GDP ratio, closer to that of China (2.3%) and India (1.7%), on the one hand, and to that of the US (8.2%), on the other. It is far from the levels of more export oriented economies like to that of Korea (17.8%) or Taiwan (34.4%), on one hand, and to that of France (22.9%) or Germany (32.6%) on the other (although for the European Union as a whole the same ratio stands at 9%). In the same year, México exported 6.4% of its GDP and Brazil

exported 4.7% (Maddison 1995). That is to say that the degree of openness of the economy is not only correlated to the level of income and to the degree of economic development, but more to the size of the domestic market and the particular insertion of a country in the world economy at a given point in time.

In Argentina, between 1991 and 1996, the period of more openness of the economy, the average ratio of exports to GDP stood at 6.25%, with maximum of 7.40% in 1996, although it tends to increase (CEB 1997). Furthermore, the Asian NICs were more comparable to the situation of the Latin American economies in the 1890s, and specially to Argentina. Krugman (1996) points out that the Asian Miracle owes more to one­off mobilisation of human and material resources ­ and thus a growth on inputs ­ than to a growth in productivity. Then, the rates of growth of the Asian tigers can not be sustained in the long term. Currency crisis in Thailand, labour crisis in Korea, environmental problems and declining growth rates during 1996 and 1997 show that this hypothesis could be right. Moreover, if we replace labour intensive manufactures for foodstuffs and rural­urban migrants for European immigrants, there is a strong parallel between the steep growth of Argentina in the end of the nineteenth century and that of the Asian tigers of the end of the twentieth century, in terms of the one­off development of an economy to reach a middle­income level, facing afterwards a crisis of productivity and being unable to cope with the trade off between capital accumulation related and the redistribution through rising wages and social public expenditure.

The role of Argentina in the contemporary world economy is utterly less important than it was in the 1890s, as its economy not only failed to catch up with the industrial core, but also it is more dependent on its domestic market, as it can be seen in Table 7. Furthermore, Argentina still has an important share of primary products in its exports. Its industrial sector, important in terms of output, relies heavily in domestic consumption. For example, in 1994, exports of primary products and its derivatives (like vegetable oil)

19

accounted for 62% of the exports, while metal manufacturing, electrical engineering and transport equipment accounted for less than 15% (RA 1995). On the contrary, the manufacturing sector accounted for 36% of the GDP, while agriculture accounted for only 8.1% (UNCHS 1996). Table 7: Argentina’s Export Sector, 1870­1992 According to Maddison 1995

1870 1913 1929 1950 1973 1992

Argentina's exports as a percentage of G7 exports 0.80 1.65 2.34 1.54 0.52 0.64

Argentina's exports as a percentage of its GDP 9.40 6.80 6.10 2.40 2.10 4.30

What were the consequences of the changes in the last twenty years for the growing Latin America megalopolises, and specially for Buenos Aires? As seen above, the three biggest metropolis of Latin America, like Mexico, Sao Paulo and Buenos Aires, are part of much more closed and self reliant economies, and are not easily comparable to the rising Asian metropolises like Bangkok, Jakarta or Kuala Lumpur. Moreover, as the composition of the world’s output shifted from agriculture to manufacturing and later to services, cities have become to be places where not only commodities are traded, but also where they are produced. Furthermore, as the service sector grew, it began to be more and more detached from the agricultural and industrial base, up to the point were some cities rely purely in a service­based economy. In the case of Buenos Aires, this process is not new and can be traced back to the end of the last century, when it already had an important labour force in the service sector. This process of economic change was accompanied by growing urbanisation, and by the unprecedented growth of the larger cities.

A stream of recent literature, departing from Sassen’s work (1991), defines the category of world cities as having four main functions in the world economy: “first, as highly concentrated command points in the organisation of the world economy; second, as key locations for finance and for specialised service firms, which have replaced manufacturing as the leading economic sectors; third, as sites of production, including the production of innovation, in these leading industries, and fourth, as markets for the products and innovation produced” (op. cit., p1). Departing from this definition, which refers mainly to New York, London or Tokyo, many authors have worked on defining a hierarchy of world cities, and discussed in which level of the hierarchy other cities are placed, and what role they are performing. In the case of Buenos Aires (Keeling 1996 and 1997), it have been discussed

whether it is a world city or not and in which category it eventually fist. However, the existence of such world cities is not new, and a global network of cities has been in operation since the early development of the capitalist world economy in the sixteenth century (Wallerstein 1980).

Although there have been substantial changes like those analysed by Sassen, at the higher level of abstraction the roles of great cities in the world economy are ­ and have been ­ two. First, there are ‘world cities’ which are the ‘switching boards’ of the world economy, i.e. the place were flows of commodities, capital, information and labour force are reproduced, accumulated and ­most importantly­ recycled and diverted. Second, there are cities that act like ‘feeders’, being channels of distribution and places of accumulation, but without the economic autonomy to command the direction of the flows nor to determine their own degree of integration in the world economy. Cities in this later category are for example Sao Paulo, Buenos Aires or Bombay. It is important to understand that these different roles are not related to population or economic size, but to their role in the network of world cities. Furthermore, and despite their ‘global’ role, some of these cities rely heavily on their own urban and national economies, and there is no sign to predict a substantial change in this respect.

3.1 Nation, 1990s

In a world of nation states, unoccupied territories cannot exist. Territories are to be occupied through urban and rural settlements with permanent populations. "The sovereignty of the modern state was constituted in mutually exclusive territories and the concentration of sovereignty in nations" (Sassen 1996 : 2). During the nineteenth and twentieth century, the nations that sought to have control of the vast and

20

scarcely populated territories of America, Asia and Africa had devoted plenty of resources to settle a permanent population as a form of securing their sovereignty on them.

In Argentina, as well as in other developing countries, this idea took form in a twofold strategy aimed to secure the empty border territories by settling nationals and at the same time reassuring the control and exploitation of supposedly strategic natural resources. This strategy was deployed in the southern Patagonia from the 1930s to the 1970s, in the form of planned and state­led initiatives of development aimed to exploit oil, coal, iron and hydroelectric power. The same occurred along the northern frontiers, where the key factor was the exploitation of the hydroelectric power of the Paraná and Uruguay rivers. Summarising, these y`poles of growth' would in due course spill over in regional development, and in this way eventually promote a shift in the distribution of the population in the territory (Borello, 1995).

It is unknown how much it was invested by the state between the 1960s and the 1980s to promote regional development. Only in 1987, four of the most backward provinces received $1 bn in industrial subsidies from the federal government, or $ 1,000 per capita, half the total that went to the interior (as a comparison, the municipal budget of the City of Buenos Aires was near $ 2bn, $660 per capita). San Luis received $ 4,824 per capita. The total subsidies to the interior in that year were equivalent to 1,7% of the GDP (Sawers 1996, 237). “Tax subsidies often exceeded the funds invested by companies” (op.cit., 237). When during the terminal crisis of 1989 and 1990, industrial promotion began to be pulled out, the immature industries crumbled. Located in sparsely populated areas and distant from each other, and distant to the gravity centre of the internal market and to access to the external markets, they could not gain momentum enough to be self­ reliant, because the local economies could not generate rapidly enough neither the necessary economies of agglomeration and location, nor the technical milieu to develop an industrial complex.

However, the fact that political sustainability had to be preserved, determined that it was not easy to adjust the provincial fiscal expenditure, which in some provinces soared as recession deepened and they were left to their own devices. As a response to the crisis, public employment was used an instrument of redistribution. In the core provinces of Buenos Aires, Santa Fe and Cordoba, average public employment is 2.4% of the total population, and it amounted to 55% as a share of current account provincial expenditure. As an average, public employment amount to 5% and 67% of the expenditure in all the provinces outside the core. In La Rioja, it amounted to 9.5% of the population and 57%

of the expenditure. In San Luis, it was 5.6% of the population and 79% of the expenditure (Sawers, 1996). This expenditure is financed with substantial redistribution of federal funds. The per capita distribution of revenue sharing amongst the provinces shows how resources flow from the core to the provinces. For example, the core provinces received $ 190 per capita, below the $ 284 national average, while for example Catamarca received a maximum of $ 1,553.

However, the provincial governments in the core provinces were aware of this situation and the fiscal burden it represented, specially in terms of poverty

21

alleviation and social welfare. Being the large cities (i.e. Buenos Aires, Rosario, Cordoba) the main destiny of migrants from the more backward provinces, these urban centres have to cope with the cost of increased urbanisation. Federal funds flows were in reverse to this trend, and since the 1960s have been allocated to promote regional development as a mean to stop migration. As this policy has had no evident effect on migration, it can be argued that what it really produced was a gap in social investment and infrastructure in the cities. This argument was raised by the Province of Buenos Aires, that achieved in the early 1990s the creation of an special account of $ 600m per annum from federal funds to be allocated to infrastructure in the part of the Greater Buenos Aires under its jurisdiction. However, as violent riots soared in 1996 and 1997 in the more backward provinces, apparently caused by growing unemployment and poverty, the federal government began to increase aid to that provinces.

As a result of the structural reforms implemented within the framework of the Convertibility Plan of 1991, inflation plummeted to its lowest levels in fifty years, GDP grew at rates unseen since the 1970s, FDI soared and trade expanded, as can be seen in Table 8. These changes that boosted the private sector had a high impact in Buenos Aires and in the rest of the cities where the high productivity private sector is more concentrated. There is evidence to think that insofar as the market forces in action both globally and nationally since 1991 can run free, they could spatially shape the country in a way that would resemble the 1890s. There is no reason to stop the growing concentration since the locational and agglomeration economies of the core cities and specially that of Buenos Aires have no compensation elsewhere, and furthermore, they benefit either from the export oriented activities ­ since they have easier access to external markets ­ and from the domestic growth of consumption, since nearly two thirds of the population are concentrated in the pampas region. Although the evidence is still isolated, there are some trends pointing in this direction. For example, according to the provincial government, while the national GDP grew 35% between 1990 and 1995, provincial GDP in Jujuy decreased by 5%. Although there has been no consistent account of provincial GDP since 1985 (data on income shown in Table 2 refers only to the main cities) the income gap appears to be increasing. Industrial location is shifting again : after forty years of free fall, the number of industrial firms in the Federal District bounced back between 1985 and 1994 from 15,864 to 17,348 (RA 1995).

22

Table 8: Convertibility Plan, Economic Indicators, Argentina, 1991­1996 According to CEB 1997

1990 1991 1992 1993 1994 1995 1996

GDP Growth (%) 0.1 8.9 8.7 6.0 7.4 ­3.9 4.3

Inflation (%) 1341.0 84.0 17.5 7.4 3.9 1.6 0.1

Exports ($ billion) 12.3 11.9 12.2 13.1 15.8 20.8 23.7

Imports ($ billion) 4.0 8.2 14.8 16.7 21.5 19.9 23.7

Net Capital Inflow ($ billion ­4.0 3.1 8.5 11.5 9.9 2.3 7.4

Moreover, since the beginning of the cycle of high unemployment in 1995, Buenos Aires appears to have a different behaviour of in relation to that of the rest of the cities. As can it be seen in Table 9, in both the rest of the cities and in Buenos Aires the rate of employment decreased but as a response the rate of activity increased much more in the later. This occurred despite that the levels of employment and activity were already substantially lower in the rest of the cities than in Buenos Aires. There seems to be both a greater capacity of the Buenos Aires’ economy to incorporate more people in the labour force and less incentives to do so in the cities of the rest of the country.

Data from the 1994 Economic Census shows the same trend towards increasing concentration of employment, as shown in Table 10.

Investment trends follow the same pattern of concentration. Assets and customers of privatised companies are highly concentrated in Buenos Aires, specially in the case of telecommunications, motor ways, passenger railroad services, ports, etc. The investment programmes of the privatised companies under the terms of privatisation contracts further concentrate the investment in Buenos Aires, spreading there their multiplier effects and increasing the city’s comparative advantages for the location of economic activities. For example, a sample search on loans financed by the International Finance Corporation (the private arm of the World Bank) according to data available from the Public Information Centre of the World Bank, shows that out of a total 19 current loans by the IFC to projects of companies in Argentina, amounting to a total of $ 2,093 m, only five loans for $ 320 m are borrowed for projects in

Table 9: Rates of Employment, Activity and Unemployment in Main Cities, Argentina, May 1987­1997 According to the Household Survey (RA 1997)

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Buenos Aires employment activity

38.7 40.9

37.9 40.4

38.7 41.9

37.4 40.9

38.3 40.9

38.7 41.4

39.5 44.2

38.6 43.4

36.6 45.9

35.6 43.5

37.4 45.0

Rest of Main Cities

employment activity

34.7 37.3

34.6 37.2

33.8 37.5

33.6 36.6

34.5 37.5

34.9 37.6

34.3 37.6

34.1 38.0

32.2 38.1

31.9 38.0

32.8 38.6

Table 10: Distribution of Firms and Jobs, 1985­1994 Shares of firms and jobs, all sectors and manufacturing, between Buenos Aires and Rest of the Country (percentage), 1985­1994 Data from 1985 and 1994 Economic Censuses (RA 1995)

Firms 1985

Firms 1994

Jobs 1985

Jobs 1994

All Sectors Buenos Aires Rest of the country

34.9 65.1

36.6 63.4

43.6 56.4

44.3 55.7

Manufacturing Buenos Aires 40.2 43.4 48.2 48.8

23

Rest of the country 59.8 56.6 51.8 51.2

Table 11: Share of Buenos Aires Port and Ezeiza Airport, Argentina, Exports and Imports, 1989­1995 Percentage According to INDEC 1995

1989 1990 1991 1992 1993 1994 1995

Exports 40.5 37.2 34.7 29.3 31.0 32.0 33.0

Imports 65.5 68.6 74.8 72.7 74.4 76.2 75.5

Exports + Imports 48.1 45.0 51.1 53.1 55.3 57.5 55.7

provinces other than Buenos Aires, Santa Fe and Cordoba. $ 872 m were borrowed only by two companies to finance water supply and toll motor way construction in Buenos Aires. The rest was borrowed mainly to finance agribusiness projects in the provinces of Buenos Aires, Córdoba and Santa Fe. Although expressly committed to finance the development of the less developed regions, the IFC is addressing only 15% of its loans to such regions. In Argentina, according to Borello and Caride (1995), the trend towards an increasing economic concentration has recovered and has been more intense since the Convertibility Plan of 1991. For example, the price of prime industrial location in the outskirts of Buenos Aires has increased fourfold between 1992 and 1994. The rate of occupancy of industrial sites soared. Only 30 industrial firms purchased land in Parque Industrial Pilar between 1978 and 1991, since when the number of firms in the state trebled in the following five years. For the authors, Buenos Aires is in ‘a road to Megalopolis which is far from the end’ (op.cit., p71, translation is ours).

Another clue of Buenos Aires’ growing economic performance vis­à­vis the rest of the country can be found in its share of international trade going through its port and airport, as seen in Table 11. It reached its lowest levels in 1991, and then it increased its share of exports and imports. An important feature of Buenos Aires is that

it concentrates nearly three quarters of the imports, and only a third of the exports. Since imports are mostly inputs for manufacturing (intermediate and capital goods are three quarters of the imports), and on the contrary, exports are mainly primary commodities, it can be argued that the downstream linkages of imports (both in services and in manufacturing) generate more added value per unit of output than the upstream linkages of primary exports. As for exports of industrial origin, they clearly benefit from imported inputs. This fact implies an uneven distribution of the effects of trade in the country regarding the generation of employment, because the core industrial urban economies are yielding a higher part of the benefits of the growth of trade.

Insofar as differentials in employment, income and trade exist in favour of the core provinces and specially of Buenos Aires, a resumption of a higher rate of growth in the economic core of the country has to be expected. As a backwash, migration of the labour force could follow suit, reproducing the pattern of economic and demographic concentration of growth already seen in the 1890s. However, census data show a lower rate of population growth for Buenos Aires that for the rest of the cities considered altogether, as can it be seen in Table 12. However, this divergence between demographic and economic growth can be due to a lagging demographic

Table 12: Population and Rate of Growth between Censuses, Main Cities, 1950­1991 Population in thousands, growth in percentage between censuses According to Vapñarsky (1995)

1950 1960 1970 1980 1991

Buenos Aires Population Growth

5,150 6,750 23.7

8,450 20.1

9,950 15.1

11,300 11.9

Core Provinces (excluding BA)

Population Growth

1,752 2,308 23.8

2,953 20.6

3,595 15.8

4,286 13.1

Rest of the Country Population 1,279 1,825 2,490 3,446 4,661

24

Growth 29.9 26.7 27.7 26.1

Total Population Growth

8,181 10,883 24.8

13,893 21.7

16,991 18.2

20,247 16.1

25

transition in the less developed regions, to an also lagging rural­urban and urban­urban in­migration to the intermediate cities or to an ageing population in the core provinces. In the long term this divergent economic development cannot be sustained without expecting the resumption of in­migration to Buenos Aires, either from the rest of the country or from neighbouring countries.

Another fact is not accounted for by census figures : to what extent Buenos Aires’s economy is overflowing to the neighbouring cities, thanks to increasing mobility in the region and new patterns of industrial location. If this is so, it means that what accounts for growth in other cities, is in fact increasingly integrated in a regional economy. As for migration, there is not enough data about it, specially for temporary workers. However, contemporary migration tends to be highly selective, and during the building boom of 1991­1994, for example, Bolivian construction workers were draw to Buenos Aires as a response to the shortage of labour force. There is no evidence to demonstrate that high unemployment could not be matched by in­migration as demand and supply of labour do not eventually match the required skills.

Hence, the landscape of the regions is one of increasing unevenness. Buenos Aires appears to be again, as it was a century ago, the engine of national growth, or at least the centre of a leading core economic region, although the demographic trend apparently shows a deceleration in population growth.

3.2 Metropolis, 1990s

When the Convertibility Plan began to be implemented, the country was in a state of terminal crisis and Buenos Aires was at its lowest ebb. It was no longer the engine of national growth. After a decade without growth, 2000%­per­annum hyper­inflation hit the economy of households and firms. The share of households below the poverty line was at a record level, as well as the inequality in the

distribution of income. Credit and savings were at their lowest levels. Public investment was utterly reduced, and public utilities companies had ceased to invest, and in some cases to deliver services, as the State cut off the subsidies in the preamble of their sold off. To make things worst, the federal government had planned to move to a new capital city in the Patagonia. Buenos Aires faced the worst fate a city can face : those who command capital and political power were about to go away with them.

Data on income is difficult to compare, specially before and after 1989 and 1990, the years of high inflation. The evolution on the distribution of income, as seen in Table 13, shows that after a temporary recovery of the lower quintiles during the years of high GDP growth of 1992­1993, during the period considered there is no substantial change in the distribution of income, although its distribution regressed from the levels of the 1970s and 1980s.

According to the more extended interpretation, the problem of the regression in the distribution of income is linked to that of high unemployment, which since 1995 is above 17% in Buenos Aires. This, in turn, is linked to the incapacity of the high productivity sectors of the economy to absorb unskilled labour force, since the composition of the employed labour force is shifting towards more skilled jobs. The share of low skilled jobs in the employed labour force decreased from 26.4% to 24.8% between 1991 and 1994 (RA 1995). Furthermore, requirements for jobs previously considered as low skilled are being raised, either because of technological change, or because firms are benefiting from a depressed labour market by hiring skilled labour force at lower wages. For example, supermarkets in Buenos Aires currently employ assistants with a monthly wage between $300 and $400 only if they have completed secondary school. According to data from the 1991 Census, only about two fifths of the population of Buenos Aires aged between 20 and 64 is in such condition (RA 1995).

Table 13: Income distribution in percentage, Buenos Aires, May 1990­1997 Scale of Households According to data from the Household Survey of (RA 1997)

Quintile 1990 1991 1992 1993 1994 1995 1996 1997

First 7.5 7.0 7.7 7.2 6.9 7.3 7.3 6.9

Second 11.3 10.8 10.7 10.7 11.2 11.1 11.0 10.6

Third 14.0 15.4 17.1 15.8 16.2 15.5 15.0 14.8

Fourth 21.5 22.6 22.3 22.5 22.6 22.0 22.1 22.3

26

Fifth 45.7 44.0 42.2 43.9 43.2 44.1 44.6 45.4

27

Table 14: Levels of Poverty and Unsatisfied basic Needs, Buenos Aires, May 1988­1996 According to data from the Household Survey of (RA 1997)

1988 1989 1990 1991 1992 1993 1994 1995 1996

Relative Poor 22.6 19.7 33.7 21.8 15.1 13.6 11.9 16.3 19.6

Absolute Poor 6.0 4.9 9.2 4.0 2.3 2.9 2.6 4.3 5.5

Unsatisfied Basic Needs 15.1 16.1 16.2 15.1 14.4 13.7 15.5 12.1 12.0

It is yet difficult to assess the long term impact of structural adjustment on the poor but poverty indicators for the last decade show (as seen in Table 14), first, that as a consequence of the regression in incomes discussed above, levels of relative and absolute poverty (which are calculated by taking into account income and a basket of goods and services) show a decrease in the years 1991 to 1994. After that, and up to May 1997 they have recovered their 1989 levels. Second, the levels of unsatisfied basic needs (which are calculated taking into account standards of housing, education, assistance of children to school, etc.) show a more stable decreasing trend.

However, there are signs of recovery of the urban economy, specially from the investment side, which grew from near 13% of the GDP in 1990­1991 to above 17% in 1992­1996 (CEB 1997). An example of recovery is the improvement of the water service, which reached its lowest coverage, reaching only two thirds of the population in 1991. In the first three years of the private concession, coverage increased from 6.0 to 6.8 millions in terms of population as investment was boosted from $145 m to $270 m per year in the same period (AA 1997). The investment in the privatised metropolitan network of toll motor ways is planned to be $ 3,000 million for the period 1995­2000.

In contrast to what was shown in Part Two, the poor performance of the building industry in the 1990s, and specially of the housing sector, shows how income inequality is a trap difficult to escape. During the 1980s, housing standards of the poor improved thanks to the efforts of the self help builders, in the absence of a developed housing industry. In spite of all the efforts made by the government under its own fiscal constraints to boost the housing sector as a mean to reduce unemployment, the housing boom which have been promised since 1991 is not showing up. Although registered housing output doubled between 1991 and 1994 from a very low level (INDEC 1995), it only reached the better off. In 1987 17.2% of the households in Buenos Aires lived in substandard conditions, at rate of more than 2 persons per room, while 4.3% lived at a rate of more than 3 persons per room. Ten years later, the situation remains almost the same, with 15.9% for

the former and 4.2% for the later. (RA 1997). As a share of the GDP, the construction sector fell from 8.14% in 1980

to 4.48% in 1990. It recovered to 6.1% in 1994 and the decreased again (CEB 1997). Great part of the increase in the 1990s is driven by investments in infrastructure, since the housing sector remains sluggish. Houses in substandard conditions are steadily a third of the national housing stock since the 1980s. Moreover, the building industry’s share of the total of loans issued by the banking system felt from 6,22% in 1991 to 4,30% in 1996 (CEB 1997).

Why housing is a problem of regression in incomes can be assessed by comparing incomes with housing and financial costs. Since 1996, credit is available in dollars at annual rates of 9% interest and in terms of up to 10 years. However, access to credit is heavily restricted for the majority of the families, since it requires that the household income should be three times the monthly instalment. For example, and according to the banks’ advertisements in the newspapers, in 1997 to finance a home of 42 m2 worth $30,000, a household has to make a monthly payment of $390 during ten years, i.e. it has to earn over $ 1170. According to data from the Household Survey (RA 1997), this level of income is only earned by the upper 30% of the households.

Even though there is no reliable or consistent data of the positive impact mad by output growth in the increase of the overall productivity in Buenos Aires’ economy, with the exception of the clues on trends on industrial location, investment and trade that have been seen in above, there are some facts that can be observed that point in this direction. First, there is an evident improvement in the levels of performance of the urban services, specially water supply, telecommunications, electricity, railroads, motor ways, and the port. It has to be noticed that some of these improvements in basic services have raised the living standards of the poor. Second, there has also been an improvement in the supply chain due to the elimination of financial constraints caused by high inflation and to technological upgrading, something that has a positive impact in both households and firms. Third, there is an modernisation and internationalisation of quality and

28

technology standards of nationally manufactured goods. For example, the automobile and the household appliances industries recovered as a result of the maturity of investments made in the last years. Contrary to what was feared, imported consumer goods invasion did not take place. This, in turn, boosted some manufacturing sectors located in the main cities, although with negligible impact in employment. Fourth, the same occurs with in the service sector, for example in the tourism industry which has been growing in the city at annual rates of 10% in the 1990s. Fifth, the resilient Central Business District of Buenos Aires and the rest of the city centre show no sign of decay, and for example, the adjacent urban intervention of Puerto Madero accumulates in the last five years more than $500m of real estate private investment. Other big scale investment in retailing and leisure has scattered from the city centre to the periphery.

What seems to be blurring the export base of the city are the combined effects of a spatial shift of manufacturing towards locations outside what the statistics considered to be Buenos Aires, and a shift of employment outside the firms by their internal restructuring due either to policies of down­sizing and out­sourcing or by technological change. Furthermore, conventional belief states that the service sector parasites the productive sector. This can be challenged by a more detailed characterisation of the producer services that appears to be a key sector specially located in the city centre (See Sassen 1991). Thus, the shift of manufacturing employment towards the fringes is not matched by a growth in the ‘unproductive’ service sector, but by a complex of activities that top an expanding pyramid of economic activities. In addition, the presence of an important statistically unrecorded sector makes the picture fuzzier.

For example, in the case of the manufacturing multinational firms, they first moved their manufacturing plants to the periphery in the 1960s or 1970s. In the 1980s, many of them moved their back office operation to the same places, leaving only the top managerial levels in the centre. From the 1990s onwards, they began to pull out all their offices from the centre. However, as they outsourced many consultancy services like lawyers, accountants or engineers, these services were taken on by consultancy firms that are located in the centre, as they can serve from there an array of companies that are spread throughout Buenos Aires. Although the coverage of the Economic Censuses of 1985 and 1994 regarding the service sector is not comparable, since the later covered more activities than the former, the evidence that comes from the real estate market points out that the demand for office space has been constantly sustained in the last decades.

This contradiction between, on the one hand, capital investment in public works, rising incomes and productivity, and conspicuous consumption of the better off, and in the other hand a crisis of consumption of the most basic means for the reproduction of the labour force, is the urban expression of the ambiguity of a regime of accumulation that does not find a way out of a self inflicted crisis of underconsumption. In spite of the symptoms of economic recovery, the gap between the haves and the havenots has been widening. However, the power of Buenos Aires to yield more surplus accumulation has recovered with respect to that of the 1980s. Hence, there are indications that the average income per capita in Buenos Aires is rising vis­ à­vis the rest of the country, although its distribution inside the urban economy is regressing. If this is occurring, there can be two combined causes to explain this performance. First, if the economy of Buenos Aires heavily relies on the domestic consumption and investment (its population being larger than that of Belgium or Sweden) a rise in the levels of savings and consumption can partly explain this new momentum Buenos Aires has gained. Second, the economy of Buenos Aires is accumulating a disproportionate part of the surplus generated by the external sector, something that, as seen above, already occurred in the 1890s

SECTION IV: CONCLUSIONS

4.0 Metropolis and World Economy

From the point of view of the world economy, there are four facts to highlight. First, even from a contemporary point of view, the world ­ and most cities, at least those already incorporated in the capitalist world economy ­ were comparatively more global in 1890 than they are now. Second, cities were then, as they are now, the places of command of the world economy, or at least, the places where either the relation between a dependent territory and the world economy was commanded or where the accumulation in a closed economy took place. Hence, the key factor of any process spatial concentration and urbanisation is that of the generation of surplus, regardless of which particular specialisation it can have in the world economy at any point in time. Third, as incomes rise, the political and economic role of the domestic market turns to be more important, making the ‘global’ dimension of cities more complex and contradictory, insofar as it can either reinforce or contradict the wider array of interests of a more developed society, making increasingly difficult for these societies to rapidly adjust to the shifts in the world economy. Fourth, although there is a process of accumulation in Buenos Aires similar to that of the 1890s, which can increase the average income, the technological characteristics of the later phase of capitalist development and its political determinations

29

have caused a regression on income distribution. The main cause of this regression is that great part of the labour force is not skilled enough. That is why there are increasing difficulties to fix this surplus generation in the urban economy, as we have seen for example, in the case of the housing sector.

The increasing concentration of economic activity in the region of Buenos Aires does not seem to be caused only by a process of integration in the world economy. However, it can be argued that the circular causation leading to increasing concentration can be enhanced by the location of a dynamic export sector, although its weight in the economy can be relative. The effects of the so called globalisation seem to be contradictory and do not have a clear effect in Buenos Aires. For example, as Argentina does not run into huge surpluses in its balance of trade as it did in the 1890s, the FDI inflows of the 1990s, attracted by higher rates of return, caused a deficit in the balance of payments. Insofar as the FDI is not massively directed towards tradeables, but mainly to non­tradeables like urban services or to the production for the domestic market, Argentina will not be able to sustain such flows in the near future, specially if rates of return tend to diminish as it is likely to happen if the investment risk decreases. Ironically, the world economy can stumble on the less virtual and mobile of the sectors. For example, Thailand’s 1997 crisis was partly caused by booming bank lending heavily directed at the real estate sector, showing that a building boom cannot be easily sustained purely by FDI in the from of fictious capital in the absence of a sound financial system to channel savings to credit.

Therefore, the driving force behind ‘globalisation’ seems to be more its demonstration effects and the speed of technological diffusion than the real flow of capital, which is scarce and whose effects are uncertain, and of labour, which are still negligible in the case of Buenos Aires. In this respect, the influence of the discourse about globalisation has to be taken into account, even though it builds more on images than on realities. While it can be argued that Buenos Aires is not a global place or a world city, the demonstration effect that the global challenge can have on a society is profound. Hence, if Buenos Aires is perceived as being global, there are likely economic effects of this belief. For example, the effort to improve the urban factors of productivity like transport, security or telecommunications, although aimed at boosting exports and external image, have a positive impact on the domestic market, and as we have seen, it can be for certain sectors much more important than the reality of the world economy.

4.1 Metropolis and Nation

Given the current distribution of the population between rural and urban, the distribution of the urban population in the existing urban centres, the current rate of growth of the population and the migration flows, a dramatic change in the spatial distribution of the population is unlikely. In spite of the fact that for the theory of globalisation capital is supposed to be much more mobile than labour, the processes circular causation of spatial and social concentration of income (processes which are not always necessarily correlated), and the existence of a vast pool of labour in the core provinces seem to exclude, under the current global conditions, the possibility of a change in trends in the internal dynamic of Argentina. The three basic factors of concentration of the classical theory of location seem to be at work : pooled labour market, concentration of inputs, and technological spillovers (Krugman 1991). Furthermore, the current pattern of flexible specialisation in the organisation of the industrial sector, and technologies like the ‘just in time’ further enhance the need for a flexible and readily available pool of labour and inputs.

The use of the pure theory of location under free market conditions extrapolates an scenario of a country with a) a core urbanised region encompassing Rosario, Buenos Aires and La Plata, containing more than half of the population, b) a core agroindustrial region covering a third of the country containing great part of rest of the population living in intermediate cities and c) two thirds of the country maintained as a kind of natural reserve populated with some scattered urban centres.

Is this configuration desirable ? It can be argued that, more than desirable, it is possible. An absolute degree of concentration is contingent to the later phase of capitalist development. Paradoxically, concentration seems to be a necessary condition for sustainability as it is generally understood. Like other NICs, like Brazil, Chile, Malaysia or Thailand, Argentina is under pressure of both the international organisations and developed countries to preserve their natural reserves, being them forests, fisheries, water courses, arid and semiarid lands, etc. There are multiple reasons for this pressure, amongst them the warnings about global warming, the reduction of biodiversity and the exhaustion of scarce resources. In extreme, the policies of sustainability as expressed by the Brundtland Report, and the agreements reached in the Earth Summit of 1992, imply, in fact, the restrain in some parts of the world of the process of economic development if sustainability is not assured, or at least holding at the lowest level of human intervention. This poses a challenge to the concept of sovereignty as it is currently exercised by the nation states.

A balance between, on the one hand, the driving force of capitalism, i.e. the generation and accumulation of

30

surplus, and on the other, the environmental and social tensions that arise from its operation, can only be achieved by political means. Social conflict seem to unfold as uneven development proceeds. Riots mounted during 1996 and 1997 in the provinces of Jujuy, Neuquen and others. Under the Argentine federal system, the provinces, although they may be negligible in terms of population and output, retain an important quota of political power. The way politics will interact with the expectable social conflicts that arise from this process of increasing concentration will define different forms of governance, as the State, far from withering away as the thesis of globalisation implies, is taking over different roles (Hirst and Thompson 1996). Either it does so via ‘regional development’ policies or via direct subsidies, at one moment or another, a liberal democratic state would have to assume in straightforward terms that its territorial and social integrity has a cost, and that this cost can only be supported by its productive core. 4.2 Shifts

In the end, what the comparison with the 1890s can teach us is that changes can be more profound than what we are ready to expect. In the 1990s, we are used to technological changes, but the prospect of million of persons uprooted, as European migrants were moved in masses from Europe to America, is now strange. In only sixty years, between 1860 and 1920, what was left from the colonial Latin America swiftly changed as it was shaken by global waves of capital and labour, in a similar way that Asia is doing it now. Physical transformation followed, and what was the ‘sea of grass’ of the pampas turned to be agricultural land, and a city of many millions appeared nearly from nowhere. Society and space changed radically, and the way it did so could have never been extrapolated from the beginning of the nineteenth century.

Looking from the 1990s to the 1890s, the period that is in between, specially from the 1940s to the 1970s, stands like a short intermezzo in the long play of the development of a global capitalist society, a period of exceptional stability and growth through a compromise of the productive forces. Some of its features will remain, but others may be not, like full employment, the welfare state, or the stability achieved by that mode of regulation. In a way, the world economy of the 1990s resembles that of the 1890s in their boom and bust, and in the instability that is present both in the global markets and in the daily life.

From an spatial perspective, the trend that can be observed seems to lead towards a twofold shift caused by the interaction of two factors : an increasing concentration of activities in the core region and at the same time the re­deployment of activities from the centre to the periphery of the core region, a movement

by which the Greater Buenos Aires is being embedded in a wider region that can be defined as the Rosario­ Buenos Aires­La Plata corridor. First, and as mentioned above, although there is only circumstantial evidence of relocation of existing activities, there is enough proof pointing out towards a concentration of economic growth in the core provinces, specially of the most dynamic and export oriented sectors. Second, there is an increasing shift of economic activities from the inner rings of Buenos Aires towards the fringes (Borello and Caride, 1995). This shift is coincident with a long trend of reduction of employment in manufacturing firms, something that can lead to the wrong conclusion that Buenos Aires is de­ industrialising. Far from that, Buenos Aires seems to be growing in output and productivity as it spatially expands to encompass several overlapping labour markets. What cannot be assumed is that this spatial transformations are directly caused by a process of globalisation, since first, these locational factors have been in operation long before, and second, the impact of globalisation is uncertain.

Whatever the future of the insertion of Buenos Aires in the world economy, or the future of the world economy, the widening social gap is not going to be closed automatically just by this insertion, since as it has been seen, neither the Argentine economy is so important in the world economy as it was in the 1890s, nor the world economy is actually so important to the common household. However the global markets can inflict severe crisis in its operation, and this crisis can have direct effects on households, like in Mexico in 1994, this does not show so much the extent of globalisation, but the weakness of the emergent economies to develop from a marginal position in the world economy.

However the world economy is, and no matter how virtual it can be, the only places of realisation of exchange values are increasingly the cities, as nearly all the population (or at least the consumers) are urban. The current phase of accumulation of profits should give way to a next phase of higher wages and consumption in order to preserve the political sustainability of the world economy. In the case of Buenos Aires, to achieve balanced growth the overaccumulation of capital flows in fixed assets, financial capital and profits has to switch to consumption of the means for the reproduction of the labour force, including housing. As we have seen, that was the way out of the crisis already used in the 1890s. The difficulty to do so in the 1990s is that with the current rates of unemployment and marginality a substantial part of the population is out of the wage economy, and more in the scope of the social policies. Some radical solutions can be imagined, like the universal social salary, but they are still far from the

31

reach of an economy with huge fiscal constrains and that still lacks of an unemployment subsidy.

The extent of the next transformation is still unknown, but cities would stand still in their places, as they did a century ago. As a final conclusion, we hopefully have some directions to understand how Buenos Aires will fare in the next round of the world economy. It probably will bear the burden of the rest of the country and specially of the more backward provinces, as they continue to stagnate. It has to do so or face national disintegration. Buenos Aires will grow in output and may be in population, if migration resumes. In a sense, it will be more global, as its economy will depend more on the external sector if exports keep on growing, but at the same time fewer people will directly depend on this external sector, as employment will keep on shifting to services and non tradeables. Thus, people will be less involved in the way the global economy affects their daily life. However, as the current world economy is more volatile than its predecessor of the 1890s, a backlash can be excepted. In such case, there is no evidence to think that concentration can be reversed, as it did not between the 1930s and the 1980s.

What we do not know is how the current twofold inequality, first, between the core economy and the backward regions, and second, within the urban core between haves and havenots, would proceed. The first term tends to disappear : how uneven can be a country in a capitalist global system without experiencing either internal or external mass migration? If there is no spatial redistribution of wealth, and forces of capital accumulation and concentration run free, there necessarily will be a spatial redistribution of population.

There have been peoples on the move throughout history, and the contrary ­ the stagnation in migration flows since 1914 ­ is the historical exception and not the norm, if we considered only international movements. But if rural­urban migration is considered, this century and the next will witness the greater mass migration in history, that one

going to the cities. It shows that the contemporary frontiers are the cities, and specially the largest cities in the more urbanised regions. Perhaps regional inequalities will disappear, but they will do so only because some regions will be emptied or marginal. Hence, regional imbalances will be transformed in social imbalances within the urban core, while inequalities and exploitation shift to it and as it unfolds in a wider region, as the only place where the exchange value of the labour force can be realised to generate and accumulate surplus value. It is in cities like Buenos Aires where the political struggle for the redistribution of the surplus will be waged, and the outcome will determine the balance between consumption and accumulation for the rest of the world economy. This is so because an absolutely capitalist world economy would be completely urban in its place of realisation and command.

32

REFERENCES

AA, Aguas Argentinas SA, 1997, “Buenos Aires Concession: Almost 4 Years Later” (Mimeo) Buenos Aires: Aguas Argentinas SA

Borello J, 1992, “The Question of Identity and the Generation of Knowledge in Latin American Planning Theory: Boisier, Coraggio, De Mattos and Rofman”, in International Journal of Urban and Regional Research, 16(4), 602­22

Borello J, 1995, “Regional Development and Industrial Promotion in Argentina: A Review of Events and Writings”, International Journal of Urban and Regional Research, 19(4), 576­91

Borello J and H Caride, 1995, “Establecimiento Industrial en las Grandes Areas Metropolitanas de America Latina”, (Mimeo) Buenos Aires : IIED­AL

Brunstein, F, 1986, “Población de Bajos Ingresos y Agua Potable en Argentina”, en N Clichevsky, B Cuenya y S Peñalva, Habitat Popular: Experiencias y Alternativas en Paises de America Latina, Buenos Aires: CEUR

CEB, Centro de Estudios Bonaerenses, 1997, “Informe de Coyuntura”, Año VII, No 65/66, La Plata : CEB

Clichevsky N, Herzer H, Pírez P, Satterthwaite D et al, 1990, Construcción y Administración de la Ciudad Latinoamericana, Buenos Aires: IIED­GEL

Coraggio, JL, 1987, Territorios en Transición: Crítica a la Planificaciónen America Latina, Quito: Ciudad.

Davezies L and Prud’homme R, 1994, “The redistributive role of mega­cities” in Fuchs R et alt., Mega­City Growth and the Future, Tokyo : United Nations University Press

Di Tella, Dornbusch, 1989, The Political Economy of Argentina : 1946­1983, London: Macmillan

Díaz Alejandro, Carlos, 1970, Essays on the Economic History of the Argentine Republic, New Haven: Yale University Press

Keeling, D, 1996, Buenos Aires: Global Dreams, Local Crisis, London: Wiley

Keeling, D, 1997, Contemporary Argentina: A Geographical Perspective, Boulder: Westview

Krugman, P, 1991, Geography and Trade, London : MIT Press

Krugman, P, 1996, Pop Internationalism, Cambridge, Mass : MIT Press

Garay A and C Rodríguez, 1997, ”Relevamiento de Investigaciones en torno a la Problemática Urbana de la Región Metropolitana de Buenos Aires”, en C Danani (ed.), El Area Metropolitana de Buenos Aires : Estudios sobre el Estado del Conocimiento, Problemas e Intervenciones, San Miguel : Universidad Nacional de General Sarmiento.

Hardoy J and M Gutman, 1992, Buenos Aires, Madrid : Mapfre

Harris N, 1986, The End of the Third World: Newly Industrialising Countries and the Decline of an Ideology, London : Tauris/Penguin.

Hirst, P and G Thompson, 1997, Globalisation in Question, Cambridge, UK : Polity Press.

Hobsbwam, E, 1997a, The Age of Revolution : 1789­ 1848, London : Abacus

Hobsbwam, E, 1997b, The Age of Capital: 1848­1875, London : Abacus

Hobsbwam, E, 1997c, The Age of Empire: 1875­1914, London : Abacus

IDH, Honorable Senado de la Nación, 1996, Informe Argentino sobre Desarrollo Humano, Buenos Aires, Honorable Senado de la Nación

IFC, International Financial Corporation, 1997, "Project Reports" [http//info. worldbank.org/search.html] (keyword : ‘Argentina’), July 1997.

Knox P and Agnew J, 1997, The Geography of the World Economy, London : Arnold

Maddison, Angus, 1995, Monitoring the World Economy: 1820­1992, London: OECD.

Martínez Estrada, Ezequiel, 1957, La Cabeza de Goliath, Buenos Aires: Editorial Nova

Pírez P, 1994a, Buenos Aires Metropolitana: Política y Gestión de la Ciudad, Buenos Aires: CELA

Platt D C M, “Domestic Finance and the Growth of Buenos Aires, 1880­1914”, in G di Tella and D C M

33

Platt (eds), 1986, The Political Economy of Argentina: 1880­1946, London: MacMillan

RA, República Argentina, Instituto Nacional de Estadística y Censos, 1995, Anuario Estadístico de la República Argentina 1995 (CD Edition), Buenos Aires : INDEC

RA, República Argentina, Instituto Nacional de Estadística y Censos, 1997, “db INDEC”, (On­line public data base), Buenos Aires : INDEC

Richardson, HW, 1972, “Optimality in City Size, Systems of Cities and Urban Policy : A Sceptic’s View”, Urban Studies, 9 :1, pp 29­48

Rock, David, “The Argentine Economy, 1890­1914: Some Salient Features”, in G di Tella and D C M Platt (eds), 1986, The Political Economy of Argentina: 1880­ 1946, London: MacMillan

Rofman A, 1974, Desigualdades regionales y concentración económica: el caso argentino, Buenos Aires: SIAP

Rofman A, and Luis A Romero, 1973, Sistema socioeconómico y estructura regional en la Argentina, Buenos Aires: Amorrortu.

Rostow WW, 1978, The World Economy: History and Prospect, London: MacMillan

Sassen S, 1991, The Global City : New York, London, Tokyo, Princeton : Princeton

Sassen, Saskia, 1996, Losing Control? : Sovereignity in an age of globalization, New York: Columbia University Press.

34

Sawers, Larry, 1996, The Other Argentina: The Interior and National Development, Boulder: Westview Press.

Scobie J, 1974, Buenos Aires: From Plaza to Suburb, 1870­1910, New York: Oxford

Scobie J, 1988, Secondary Cities Argentina: The Social History of Corrientes, Salta, and Mendoza, 1850­1910, Stanford: Stanford University Press.

Sunkel, O, et alt, 1990, The Environmental Dimension in Development Planning, Santiago de Chile: ECLAC/ILPES/UNEP.

UNCHS, United Nations Centre for Human Settlements, 1996, An Urbanising World: Global Report on Human Settlements 1996, Oxford: Oxford

Valladares L and M Prates Coelho, 1997, ”La Investigación Urbana en América Latina : Tendencias Actuales y Recomendaciones”, UNESCO­MOST, [http :/www.unesco.org/ most/vallspa.htm

Vapñarsky, CA, 1995, Primacia y Macrocefalia en la Argentina: La Transformación del Sistema de Asentamiento Humano desde 1950, Desarrollo Económico, 35(138): 227­253

Vapñarsky C and N Gorojovsky, 1990, El Crecimiento Urbano en la Argentina, Buenos Aires : IIED­AL/GEL

Wallerstein, I, 1979, The Capitalist World­Economy, Cambridge: Cambridge University Press.

World Bank, 1994, World Development Report 1994 : Infrastructure for Development, Oxford : Oxford.