Inflationary pressure: Argentina’s strikes

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Taiwan's richest man has joined the country's presidential race. Terry Guo founded Foxconn, a manufacturing giant that makes iPhones and lots more. But much of Mr. Guo's business is based in China. His rags to riches story may charm some, but he'll struggle to shake the perception that he's cozy with Taiwan's biggest geopolitical threat. And America's Supreme Court is considering a tricky issue. Whether to strike down a law that forbids trademark protection for companies with racy or outright profane names. But first, in Argentina, trade unions are trying to bring the country to a halt. A labor strike will take place today, followed by a rally at the Presidential palace tomorrow. The unrest is just the latest challenge to President Mauricio Macri's tenure. When Mr. Macri was elected in 2015, there was hope that his pro market reforms would fix Argentina's ailing economy. But last year, a currency crisis helped to drag the nation into recession. Mr. Macri turned to the IMF for.

Help.

In the form of a record $57 billion loan. But the economy is still in dire straits. Over the past year, food and drink prices rose 64%. Since January, the peso has fallen more than 16%. And the recession continues. Facing an election in October, Mr. Macri announced a freeze on the prices of basic goods and public services two weeks ago to counter his growing unpopularity. But his chances of re election are fading. Today's strike was called by the Argentine Workers Central Union to protest against his austerity policies.

What we're already seeing is pretty much a lockdown throughout Buenos Aires today. The buses are running, some of the trains are running, but the airports are closed, the subway is down, schools are out, banks are closed, and even hospitals are being obliged to say that there will only be a Sunday service.

David Smith is our Argentina correspondent reporting from Buenos Aires.

And at the same time, we have thousands of people gathering at some 200 concentration points across the capital for the demonstration which is going to the Plaza de Mayo outside the Presidential palace. And this is the first of two days like this, because tomorrow, May Day, potentially an even bigger gathering.

And what are these protests and strikes all about? What are the policies that the unions oppose so vehemently?

Well, in the words of one union leader, probably the best known union leader in the country, hunger, poverty, misery, and a debt. A debt which he says is destroying Argentina. His Argentina. Yes, the poverty numbers have gone up. Yes, hunger has become an issue in certain parts of the country. But the key one here really is inflation. Inflation running at 54%. That puts Argentina way up there. And that is the impact that the economic policies have been having and which have stuck home across the board here, going well beyond the union movement. 90% of Argentines, we're told, according to the polls, make inflation their number one priority.

But Mr. Macri came to office as a sort of market friendly, pro business reformer type. Why has he struggled so much to get things right in the economy?

Yeah, you're right. I mean, Mauricio Macri came to power as an agent of change, a reformer who was going to try and undo decades of populist government here in Argentina. But he went for a gradual approach, not shock therapy, as some had suggested. And that left him vulnerable, and left him vulnerable to the emerging market currency crisis, when interest rates shifted in the United States, for example, and the stronger dollar. And that led to recession in the second half of last year, which has left him much weaker politically. And we have elections here in October. And there's a risk that his predecessor, Cristina Fernandez de Kirschner, who was president between 2:7 and 2:15, who is under indictment on multiple corruption charges, could return to power later this year, because the polls are saying that at the moment she could beat Macri.

And what would be the risk then if she were indeed to come back to power?

Well, the risk is obviously a return to the kind of populist policymaking. One of the elements of Cristina's final period was, how should we put it? Economy with the truth on economic statistics. Inflation was very high, but Argentina was told that it was very low. At the same time, government spending, the government deficit went through the roof, and the markets are running scared, to put it mildly, of her return, which has led in recent days to this run on the peso, to this deepening sense that Macri, the agent of change, the reformer, could lose and return this country to where it's lived for decades.

So in the face of all that, then Mr. Magu must be sort of running scared a little bit. What's he been doing to try to keep his popularity numbers high ahead of the election?

Well, about two weeks ago, we had a new anti inflation package which attempted to actually use a policy which the previous government had utilized. Price controls on the shopping basket, basically. But this is very much a return to a policy which has not worked in the past, although I do think it has the feel good quality for Macri in the short term of making ordinary men and women feel that the President is looking out for them when they tell him that inflation and the price of a shopping basket is their number one concern.

Then if that's something of a ruse, is he doing anything concrete to address the economic turmoil?

Well, one important element which we saw yesterday on the eve of these major strikes, was the government agreeing with the International Monetary Fund that the central bank can now intervene to prop up the peso, which has been falling so dramatically against the dollar, with more of its foreign reserves, much of which has come from the IMF in the first place. And basically it gives the central bank greater flexibility to try and prevent this collapse of the peso. These are desperate times and fairly desperate measures.

More broadly, it sounds as though Mr. Macri needs to right the economy on one hand and keep the electorate onside on the other side. How can he strike that balance?

Macri had been asking this country to change forever, to look at itself in the mirror and to accept that it couldn't carry on with populist government, offering subsidies and welfare programs that enabled people to survive, but never really to progress. And Macri's dilemma now is whether he can afford that. He's made significant inroads, for example, in reducing the fiscal deficit. He's made significant inroads in terms of addressing the challenges of infrastructure in this country, be it roads, be it sewers, be it the subway, which ironically is closed today in Buenos Aires. But one of the features of this period of government has been that kind of development within Argentine society, to return to the world, do business with the world on the world's terms, and to be as profitable and as successful as this country in theory should be, given its natural resources, given its human capital. So Macri, in a sense, is on the horns of a dilemma now. He says, we're not going back. We're not going back to the mistakes of the past. But on the other hand, he lacks the economic flexibility in the current environment to actually show how he can go forward and how he can improve ordinary people's lives.

David, thank you very much for joining us.

Thank you for having me.

When Taiwan's richest man, Terry Guo, launched his bid for the presidency, he chose his location carefully. Amid a cacophony of journalists, gongs, and drums, he arrived at a temple of the sea goddess Mazu in a gritty neighborhood of the capital, Taipei.

I tell you, I'm like a godson to Mazu.

Wearing mirrored sunglasses and a jacket bearing the temple's name, he declared Mazu had called on him to step up his efforts for all her temples and the people of Taiwan. In a dream, she had told him to run for president.

I'll definitely respect and follow Mazu's will.

But while Mr. Guo may claim a divine right to rule, voters in Taiwan's vigorous democracy might need a little more convincing before the election next year. Both the tycoon and his company, Foxconn, have seen controversies there.

As a candidate, Terry Guo has all the strengths and weaknesses of a rich businessman.

Edward McBride is the economist's Asia editor.

He's Taiwan's richest man. His net worth is estimated around $7 billion. He founded a company, Foxconn, famously makes iPhones. It's the biggest contract manufacturer of electronics in the world. So he has this reputation in Taiwan, an incredible success story. And in particular, he's created jobs, a million jobs, roughly that Foxconn has created around the world. So he's got great selling points. Unfortunately, like all businessmen, of course, you can also pull apart his record. He has some weaknesses, too.

Right. But broadly, so far, the Taiwanese are liking the sound of a man who can run a big business like this.

Well, the big political grievance with the incumbent president, Tsai Ing Wen, is that the economy hasn't done especially well under her. It hasn't done badly. But in particular, wages have stagnated in Taiwan for a long time, like they have in so many other countries. And voters are looking for someone who they think can bring good paying jobs. And of course, if you're a very successful businessman, you can very easily make a pitch around your economic nous. And that, presumably, is what Terry Gore intends to do.

Right, but you mentioned that that kind of reputation comes with drawbacks. What are they?

Well, you can't create a business that big without occasioning some criticism over the years, and certainly Foxconn has come in for criticism. About a decade ago, there were a spate of suicides at one of its factories in China, and people were asking whether it treated its work as well. But in fact, a bigger problem for Terry Guo than that is that most of Foxconn's factories are in China. He hasn't created that many jobs in Taiwan. In fact, his business model is based precisely on making things in countries with low wages. Not just China, but others, not so much in Taiwan. So he's not really a job creator for Taiwan.

But one of the biggest political issues in Taiwan is the relationship with China, a particularly fraught one. How does that square with the fact that this businessman with lots of interest, interests in China is trying to be leader?

Yes, part of becoming such a successful businessman was building very close ties with China. Foxconn has its biggest factories there. It's got most of its employees there. Terry Guo's wealth and success is totally dependent on China. And so many Taiwanese, since he announced his bid for president, have been asking, how is it possible to have someone in our highest office who's beholden to a country that quite regularly threatens to invade and says Taiwan should be part of China and exercises all kinds of pressure to try and get Taiwan to toe the Chinese line? How can we have a president who's so obviously susceptible to Chinese pressure because of his business interests?

Well, it must surely be the case, then, that other candidates, his political opponents are, are really digging at that point.

So one of the people I spoke to about this is a member of Parliament called SEO Bi Kim. Just for context, she's with the ruling Democratic Progressive Party, and Mr. Guo is seeking the nomination of the biggest opposition party, the Kuomintang.

Well, at the moment, China has sovereignty claims over Taiwan, and China also threatens to use force against Taiwan. So we can consider China as a politically and militarily threatening opponent of Taiwan at the moment. And so to have such economic leverage, especially if it is the majority of the private assets of someone with significant political influence in Taiwan, dominated by the Chinese and easily influenced, I think that would be a serious cause for national security concerns among many people here in Taiwan.

And is this something Mr. Guo has been called to respond to yet?

Absolutely. So the first week of his candidacy, as it were, he got into a row with the incumbent President, Tsai Ing Wen. She dredged up a comment he made a few years ago when big anti Chinese protests were paralyzing the country. And he said, you can't eat democracy. She said, this shows he doesn't understand, he doesn't value Taiwan's democracies, not worthy to be president, in effect. And he reacted absolutely furiously, clearly not wanting to be labeled that way, saying that his comment had been taken out of context and he just meant democracy should be a tool to bring prosperity. He was obviously so worried about the idea that he might be considered a sort of apologist for authoritarian governments, China in particular, that he set up this online poll where he asked whether the President might have misquoted him because she was really stupid and really naive. That was one choice. Or really malicious and really willful. That was the only other choice. So clearly there's a lot of sensitivity about whether he's too close to China and too ready to sort of do down Taiwan's democracy.

So do you have a sense in terms of a broader policy with China, how he would act if he were to win?

Taiwanese politics, at least the foreign policy element, boils down to two kind of opposing views of how to handle China and China's claims to Taiwan. The ruling party, the dpp, says that Taiwan should try and assert its independence and try and persuade other countries to treat it just like any other independent country. The opposition, the Kuomintang, they say that the best course is to maintain really good relations with China, and that's a way of fending off any possible Chinese attack or aggression. So Terry Gore is trying to get the nomination of the Kuomintang. Clearly he would stick to a more pro China good relations policy. The question is always just how far do you take that?

Well, what about the Taiwanese people, as far as you can tell so far? What are they making of this campaign?

Well, it's very early. We've only got the first opinion polls in. I think it's safe to say he's a very strong candidate. First, he has to win the primary within the Kuomintang. He seems to to have quite a tough run on his hands there. If the most popular Kuomintang rival runs mayor of Taiwan's second biggest city. So that's not quite in the bag. But then the polling, if he does get through, to be a national candidate, looks pretty favorable compared to the incumbent Tsai Ing Wen, so he would certainly have a chance.

Edward, thanks very much for your time.

Thanks for having me.

The American Supreme Court has been known to sidestep some tricky issues. But in a recent case, justices and lawyers went to great lengths to avoid saying the name of one particular company.

The equivalent of the profane past participle form of a well known word of profanity, and perhaps the paradigmatic word of profanity in our language.

The government's lawyer, Malcolm Stewart, was avoiding saying fucked. That's F U C T A clothing company at the center of a case about when the government can deny trademarks.

There is an edgy clothing company that was started in the 1990s selling a line of T shirts, hats and hoodies.

Steven Mazzy covers the Supreme Court for the Economist and has been following the family friendly fun as the case went all the way to the highest court in the land.

And in about 2011, the owner of this brand decided he would like to apply for a trademark. He did so, and he was refused by the U.S. patent and Trademark Office. In their decision, the Patent Office said that the name had antisocial imagery. It had a lack of taste. And my favorite part was that it showed extreme nihilism. Showing that the Patent Office prefers meaning.

Rich trademarks in commerce notwithstanding any avoidance of nihilism isn't allowing a company to have whatever name it wants a matter of free speech.

So the question here is not whether this clothing line gets to keep its name fucked. It does. The Patent Office is not going to reach out and tell the owner of the clothing line that he can no longer use that name. The only question is whether the owner of FUGT would be able to have that name registered as a trademark, which he can then use to prevent counterfeiters from cutting into his profits.

So what are the arguments then being made about whether or not FUCKT should be allowed into the Protective Club?

Right. Well, one of the main worries that many of the Justices had was by looking at a number of profane and vulgar words which had been approved by the U.S. patent and Trademark Office, and noting that the rule has been applied in a rather haphazard way, Justice Gorsuch suggested at one point that it seemed as if a coin flip was the main rule in the mind of the bureaucrats who were looking through all of these applications. And there are some colorful examples in one of the most amazing court filings that I've ever seen, showing that terms like wondrous vulva puppet was fine, but camel toe surf wax wasn't.

And so, Stephen, if all of these businesses already have these names that tread a line and some of those get trademarks, or what's the real argument against striking down this law?

Right. Well, there were a few Justices who are worried that if they strike down this clause, patent officers won't have any recourse. There'll be no backstop for them in being able to turn down marks that are profane. There seems to be sort of a phantom concern that if the Supreme Court strikes down this part of the law, there's suddenly going to be nastiness everywhere in commerce, it just doesn't seem likely. Most of these more scandalous marks appeal to a rather niche market. There are many of them that the Patent Office has approved. And that doesn't mean that we walk through life and see on buses terrible words that shock us when we're driving down the road.

So even if the long list of trademarks eventually does get fucked, that doesn't mean we all will. Steven, thank you very much for your time.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and you can subscribe to the economist@exterator.com radio. Offer 12 issues for $12 or 12 pounds. See you back here tomorrow.