Randy McDonald (rfmcdpei) wrote,
Randy McDonald
rfmcdpei

[LINK] "Argentina: The Myth of a Century of Decline"

Eugenio Diaz-Bonilla, writing for Economonitor, makes a superficially persuasive case that Argentina's period of pronounced economic decline relative to the United States and Europe isn't a century old. Argentina, he suggests, declined relative to the north after the Second World War like Australia, unlike Australia starting from a relatively lower point. The big economic shock came much later.

Below I will try to show that instead of a “century decline,” what characterizes Argentina’s economic evolution as compared to other countries is that it suffered a deep economic collapse from the mid 1970s to the end of the 1980s (in what follows, data is from the Maddison Project. http://www.ggdc.net/maddison/maddison-project/data.htm).

This structural break in the evolution of the GDP per capita (GDPpc) in Argentina can indeed be attributed to internal conditions in that country. But other than that, there is not much difference in the evolution of Argentina, when compared to, for instance, Australia, or Uruguay, two countries mentioned by The Economist as either not having suffered the “hundred year decline” and/or to have followed better economic and institutional policies than Argentina. It is true that other countries such as Korea or Spain, which had far lower GDPpc than Argentina during great part of the 20th Century overtook Argentina by a large margin since the 1970s. But it is also true that if Argentina had avoided the sharp drop in the 1970s and maintained the share of the US GDPpc that prevailed before that structural break, the country would have had now an income per capita above all countries in LAC and many European countries such as Portugal, the Czech Republic, Hungary, and Poland. And if it had maintained the lineal trend growth from the 1960s to the mid 1970s it would be now at about the level of New Zealand or Spain, according to the data of the Maddison Project. In other words, if Argentina had avoided the real tragedy that started in the mid 1970s, the country would be now a developed country.


The cause? Totalitarianism and its aftermath.

The decline started with the fracture of the society after the death of Perón in 1974, but it was the subsequent military coup of March 1976, which aiming at stamping out the Peronist Party and its followers (a “final solution” for Argentina, if you will), killed and forced into exile a significant number of Argentines (which among other things hollowed the previously relatively well-built basis of scientists mainly in public universities), started to dismantle the manufacturing base that was supposed to give the Peronist Party its loyal labor base, generated the debt explosion that led to the 1980s debt crisis, and spent a large amount of fiscal resources into different military adventures (including the misguided invasion of the Malvinas, which generated further loses of lives as well). The Radical Party, with President Alfonsín, won the elections in 1983 and did a very good job at restoring the democratic institutions (including the unprecedented trials and imprisonment of the military leaders responsible for the tragedy of the 1970s. But the Administration was hobbled by the very weakened and highly indebted economy left by the previous dictatorial government, had to contend with a restive military (which attempted several coup d’etats in the 1980s and 1990s, until the putschists were finally defeated during the Menem Administration), was under the pressure of a labor force that was expecting improvements in its living conditions after a decade of wage compression under the military, and suffered the collapse of commodity prices in mid-1980s.


This is an interesting rephrasing of Argentina's economic situation, taking it out of a Latin American context and putting it into a post-totalitarian context. Spain and Portugal, after their democratic transitions in the mid-1970s, went through a decade-long period of decline relative to northwestern Europe, as did central Europe in the decade after 1989. Recovery came only relatively slowly, and full convergence still far from complete.

Is Diaz-Bonilla correct in suggesting that Argentina is going to remain in the convergence club and retake its lost position towards the bottom of First World income rankings? Is his analysis correct at all, or enough? I wonder.
Tags: argentina, central europe, economics, former soviet union, links, politics, portugal, spain
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