*** Argentine economy








Argentine Economy


Figure 1.--.

"Give people, especially workers, as much as possible. When you feel you are already giving them too much, give them more. You will see the results. Everyone will try to scare you with the specter of economic collapse. But it's all a lie. There is nothing more elastic than the economy, which everyone fears so much because no one understands it ...."

Juan Domingó Perón, 1952


Argentina is one of the Latin American countries most blessed by nature. There are some countries that you understand arehard pressed to establish a prosperous ecionomy. Not Agentuna. The vast Pampas is a fertile region that along with arange of natural resources should support a prosperous economy. And it looked like Argentina would become the first country in Latin America to create a developed ecvonomy. . World War I gave a tremendous boost to the country's economy. This development, however, ultimately failed because of the growing politcal power of socialist-oriented labor unions combined with the populist politics of Col. Juan Peron. The subversion of the legal system by the Peronistas and the commitment to social welfare programs the economy could not support resulted in economic disaster which ave continued to this date. Entrpreneuers were reluctant to invest in Argentina. And as a result the country has lurched from one economic crisis to another. The Falklands War was a thinly duisguised effort by a military junta to destract the population from economic problems. As a result, living standards have remained far below European and North American standards. National bankruptsy resulted in some short-term free market reforms and prudent fiscal policies. Argentina in recent years has benefitted from the rise in commodity prices, especially increasing agricultural prices. The Government of President Cristina Kirchner has pursued a range of repressive policies and increasingly havy-handed state control. This continued the now familiar Argentine pattern of inflation, repression, and state control leading to more economic failure despite the country's great potential.

Natural Assetts

Argentina is one of the Latin American countries most blessed by nature. There are some countries that you understand arehard pressed to establish a prosperous ecionomy. Not Agentina. The vast Pampas is a fertile region that along with arange of natural resources should support a prosperous economy.

World War I (1910s)

Argentina was reporting impressive economic growth at the turn of the 20th century. This growth was put on strroids by World War I. Argentia during the first three decades of the 20th century reported higher growth rates than both Australia and Canada. Few other countries were growing as rapidly. Argentina remained neutral in the War. World War I gave a tremendous boost to the country's economy stimulating exports. I lost German markets, but gained Allied markets. The war created a huge market for Argentine products. The Argentine economy was heavily oriented toward the food sector. And Europe needed food. Argentina emerged from the War not onkly as tge as the crown jewel of Latin America, but one of the richest countries in the world. It had a solid gold-backed currency and a percaopita income above that of many European countries. It looked like Argentina would become the first Latin American country to make the all-important transition to a developed ecomnomy. It is also imprtant to understand, however, that Argentina did not have a balanced ecionomy. Agriculture was very important. And much of the industry that existed was in the food sector.

Socialist Policies (1920s)

Argentina despite the country's heady economic gains under capitalist policies became enamored with socilist economic policies. Voters began electing socialist governments. It as this point that Argentine Governments began enacting socialist policies. The same was happening in Europe to a lesser degree. New laws controlled factory operations and working hours and conditions. The Government vegan natiinalizing industries such as energy and transport. All of this affected the efficebncy of the economy and the willingness of industrialists to invest in new nterprises. Not only didceconomic efficency decline, but Governments expanded the public payroll. The state bureaucracy became increasingly bloated--another draf ob the economy.

The Great Depession (1930s)

The advent of the Great Depression gave Argenbtine socialist tghe excuse further imoplement their economic policies, measures that they had been advicating for decades. Voters harmed by the Depression were able to accept major change. The Government significantly increased if not exploded spending. The Government adopted a major industrial program. The effiort was a dusaster having no real imoact on ending the Depression. (The New Deal in the United States despite some important programs, also did not end the Depression. The Supreme Court in America put a break on New Deal ruling socialist-orienred programs like the National Reciovery Act illegal.) There was no break on Argentine socialist programs. To finance all the spending, Argientine Governments began turning on the printing presses and abandoned the gold standard. The devalued the peso by half. Production plumeted.

Peronismo

This development was, however, ultimately failed because of the developing politcal power of socialist-oriented labor unions combined with the populist politics of Col. Juan Peron--Peronismo. Peron's seizure of power (1946 began aong multi-decade decline. The subversion of the legal system by the Peronistas, coruption, mismanagement, and the commitment to social welfare programs the economy could not support resulted in economic disaster. Entrpreneuers were reluctant to invest in Argentina. And as a result the country has lurched from one econimic crisis to another. The Falklands War was a thinly duisguised effort by a military junta to destract the population from economic problems. As a result, living standards have remained far below European and North American standards. Argentunbe goivernments continued Perinismo long after Col. Peron was long gone.

Free Market Reforms

National bankruptsy in the 1980s resulted in some free market reforms and for a time prudent fiscal policies. Argentina in recent years has benefitted from the rise in commodity prices, especially increasing agricultural prices.

Kircherismo (2003-15)

The Governments of President Nestor and Cristina Kirchner has pursued a range of repressive policies and increasingly heavy-handed state control. Nestor Kirchner achieved some success early in his predicency, but then the econmy began to decline. His wife who suceeded him had few sucesses to report. There have been secret contacts with Venezuela including a suitcase full of dollars from Caracas found at the Buenos Aires airport. President Kirchner has adopted the now familiar Argentine pattern of inflation, repression, and state control leading ultimately to economic failure despite the country's great potential. Argentines who have been through all of this before are aggrssiveky converting their pesos to dollaes President Kirtcher's answer is to retrain drug sniffing dogs to stiff out dollars being moved out of the country. Argebtina like like Venezuela is now search for cash that it people are trying to moce out of the country. The airport, [port and bus/train station police has nothingvto do with national security. It is instead all about the preservation of foreign reserves as the country's cash position is being eroded by the deterioration of confidence and through undue offical use." 【La Nacion】 (December 3, 2011). Mrs Kirchner's Socialist husband was elected on a platform of respect for civilan liberties in reaction to years of military rule. Police and dollar sniffing dogs at the border are just the tip of Mrs, Kirchner's campaign against civil liberties. Following Hugo Chavez's police state tactics in Venezuela, she has attacked the country's free press. President Kirchner and her allies rammed through a package of laws targerting the press and free spech (December 2011). After 8 years, Kirchner's populist economic policies are obviously failing. Price controls and contract abrogtion are reducing foreign investment flows. Unable to report economic successes, the President is moving to control ythe press so she can spin reporting to Argentine voters. Government expenditures are up 40 percent while revenue is only 30 percent. 【Guidotti】 Many Argentines can do the math. Other countries can borrow to fil the gap, but Argentina has been cut off from capital markets since 2001 because it is in default from the Paris Club governments and private lenders. The Central Bank has apparently been printing money to fill the defecit gap. 【Guidotti】 Inflation is believed to be running at over 20 oercent. The Central Nabks insits it is only 10 percent and that it is using capital controls and market interventions to limit peso devaluation to a comparable level. Markets understand this is not the case which is why capital is fleeing he country. People undestand a major devaluation is inevitabe. This is why Argentines want to hold dollars. But many understand that is no real potction. They face a Government confiscation of their Argentine accounts or even safe deposit boxes. This is why people want to get their dollars to Uruguay or other foreign countries. To close the budget defecit, the Government has begun to cut gas, electricity, and water subsidies, but is concerned about the public reaction. President Kirchner is thus moving to control media dicussions of her policies. She believes that control information and expanded police powers can be used to silence dissent. Axtions include: 1) Since 2003 the Government has used official adverizing to reward friends. The Supreme Court has ruled this practice illegal, but the Government continues to do it. 2) The Government in 2009 gave state orinted NGOs two thirds of the Broadcast spectrum. 3) The Government is forcing the Clarin Group to reduce is cable-TV markt on anti-trust gounds. No restricions limit the Government share.A new law passed December 2011 will allow the state to control doestically controlled newsprint. 5) An anti-terrorism law has been passede to supress discent. Chavez in Venezuela has used this same appraoch.

Mauricio Macri (2015- )

Mauricio Macri was elected president (2015). He is the first democratically-elected non-radical or Peronist President since 1916. He was previously the mayor of Buenos Aires (2007-15). His election ended 12 years of corupt rule by presientil couple Nestor and Kristina Kirchner. Macri has began to implement a wide rnge of free market reforms.

Javier Milei (2023)

Argentine again experiened economic disaster. Inflation rched 130 percent. Poverty 40 percent. And nationl bankruptsy. This was the fifth hyper-inflation in as mny decades. Finally the Argentine voters were convinced tht the old economic order had to change. The presidnt did not dare run for reelection. The crisis convinced a strong majority of Argentine voters that change was needed. Economist Javier Milei running on a platform of closing the Central Bank, ending costly subsidies, and balancing the budget won the election (December 2023). Some 55 percent of Argentine voters voted for him. Argentine and American journalists describe him as far-right and radical. Which tells you about the political orientation of modern journalists. What could be more radical than policies which create hyperinflation. What we do not know is hiow long the voters will tolerate painful austerity that Milei is imposing. .

Sources

Guidotti, Pablo. Universidad Torcuato Di Tella, in O'Grady, "Argentina's capital flight," The Wall Street Journal (January 6, 201), p.11.

(La) Nacion (December 3, 2011).

O'Grady, Mary Anastasia. "Argentina's capital flight," The Wall Street Journal (January 6, 201), p.11.









HBC






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Created: 7:19 AM 12/21/2011
Last updated: 5:54 PM 12/16/2023