How Argentina Fell Behind the Rest of the World

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Argentina is a country famous for football, for its invention of tango, and for its great beef.

Amongst economists, however, Argentina is also famous for its economic slide backwards over the past century. Before World War I, Argentina had one of the ten biggest economies in the world. Argentinean living standards were amongst the highest in the world. It looked like Argentina would become a modern-day Australia or Canada.

That didn’t happen. Today Argentina is widely considered a Third World country. Its income, relative to the rest of the world, has plummeted. In 2001 Argentina suffered the greatest economic crisis in its history.

What happened?

There are a myriad of reasons. Wikipedia provides a pretty good overview of the gritty details, which this post won’t get into. But underneath the rush of events and crises there are several underlying factors. These factors were the catalysts for the events and the century-long decline of Argentina’s economy.

The Endless Coups

Military coups are the primary and most important factor behind Argentina’s economic decline.

Argentina’s people are very left-wing, and when left to their own devices they will generally elect a left-wing president. However, like many Latin American countries, Argentina also has a very strong right-wing minority. This conservative minority constitutes the business elite of the country, and they generally loathe the left-wing presidents that the people will select (sometimes for good reasons, sometimes for not-so-good reasons).

The current president, Cristina Fernández de Kirchner, is a great example of this dynamic. The Buenos Aires elite hate Cristina and think that she is an awful, awful, and stupid president.

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And yet Cristina won 54% of the vote in her last presidential election. The second-best candidate got just 17%. Obviously lots of Argentinians support her.

So in a free and fair election the Argentinian elite will get a left-wing president whom they loathe.

That’s where the military comes in.

For decades, every time that Argentina elected a person too far to the left for the generals, the military would charge in and kick him or her out with the support of the business elite (and often the United States).

This did enormous damage to the country. In fact, it’s hard to overstate just how bad the coups were for Argentina. In 1930, for instance, Argentina was a democracy with a popularly-elected president from what at the time would be considered the left. At the time, it was one of the most progressive countries in the world. Then General José Félix Uriburu assaulted the Casa Rosada, disposing President Hipólito Yrigoyen, and ushered in an “Infamous Decade” of military rule and stolen elections. This was a turning point in Argentinian history. It would be more than half a century before democracy recovered, and meanwhile the political chaos crushed the economy. If democracy had survived in 1930, Argentina might be as wealthy as Italy today.

One coup in particularly deserved to mentioned: the last and worst one. This occurred in 1976. Once again there was a president, the incompetent Isabel Perón, and in the usual pattern the military disposed of her:

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The generals proceeded to mismanage the economy (as they had in the past), commit the worst human rights violations in Argentinian history, and – to top it off – lose a mad war against the United Kingdom over a pair of islands.

In fact, the loss of the Malvinas War is one main reason that there are no more coups today (the other is the end of the Cold War). It’s the reason why Argentina returned to democracy. Argentina’s military lost a huge amount of prestige with it. People no longer felt any respect for an institution which had been humiliated in a war.

The Failure of the Left and of Peronism

There’s been a lot of blame placed on the right so far. But the left is also to blame (although not as much as the right).

The problem is that while Argentinians as a whole have supported left-wing presidents, those presidents have generally failed with regards to economic policy. Isabel Perón, the aforementioned president disposed by a coup, presided over a terrible period of hyperinflation and terrorism. The problem is that whenever a left-wing president failed at managing the economy, the people didn’t get a chance to kick him or her out. Instead the military would always intervene and mount a coup. So the people never got to learn that Peronism was a failure.

What is Peronism? It’s the philosophy and movement of Juan Perón, the man pictured at the beginning of this post. Peronism is a hugely important part of Argentina’s history; you can’t talk about Argentinian politics without mentioning it. Even today most Argentinian politicians label themselves as Peronists (which makes the term lose a lot of its original meaning, ironically).

Perón was a hugely popular leader of Argentina during the late ’40s and early ’50s, until he was disposed in a coup. During the following decades Perón, in exile in Spain, maneuvered to place friendly presidents in power (they were then disposed in more coups). In the early ’70s Perón was able to successfully able to return to Argentina, where he became president for a year before dying at a terrible time. His third wife Isabel, who took over afterwards, was then disposed in yet another coup, as has been mentioned before.

Although Perón himself was from the military and had fascist tendencies, his philosophy Peronism is an undeniably left-wing philosophy. It praises the Argentinian working class and hammers the elite and foreign corporations. Peronism is big on nationalization and unionization, and under Perón unions became hugely influential (and still are).

Perón (and his second wife Evita Perón) is a hero in Argentina, but outside the country he is regarded much more negatively for admiring fascism, for womanizing (he met his third wife as a nightclub dancer, which might have something to do with why she was a failure as president), and for his unsuccessful economic policies.

While Argentinians continue to hold Peronism in high regard, it seems to have hurt the economy in the long run. Peronism seems to have been linked to inflation; before Perón inflation was not a factor in Argentina. Yet inflation started under Perón’s government in the ’50s, got steadily worse, and turned into hyperinflation during the ’80s. Perón also spent a lot of money on both social programs Argentina couldn’t afford and on making Argentina produce shoddy industrial goods which nobody wanted to buy. The nationalized corporations, such as the state telephone company, also proved generally inefficient. Argentina ended up getting into debt. Like the inflation, the debt got steadily worse. It ended up in the default of 2001, the worst economic crisis in Argentina’s history.

It’s arguable that Argentina would have been better off if Peronism hadn’t existed.

Conclusions

The picture above shows two former presidents of Argentina. To the left is the much-beloved Raúl Alfonsín (he is loved for fighting for democracy during the last military dictatorship). To the right is the much-hated Carlos Menem.

The two presidents above are connected with the worst periods of Argentina’s economic history. While Alfonsín was great at fighting for human rights, he was terrible at managing the economy. Under Alfonsín Argentina underwent its worst hyperinflation in history. The inflation didn’t start with Alfonsín (it started with Perón), but his efforts fighting inflation ended up making it much worse. Alfonsín’s successor Menem implemented neoliberal policies and successfully ended the hyperinflation. Unfortunately, his currency board (which pegged the Argentinian peso and the U.S. dollar at a 1-to-1 ratio) directly caused the 2001 economic crisis. During the presidency of Menem himself the economy did decently; it was under the next president that the bottom fell out.

All in all, both the left and the right are to blame for Argentina’s economic decline. The right is to blame for its coups, which caused half-a-century of political chaos. The left is to blame for its unsuccessful economy policies, especially Peronism, which ended up sending Argentina down the wrong economic road. But here blame falls on the right again, for when Argentinians did test out right-wing economic policies with Menem in the ’90s, his failed currency board led to economic disaster.

The great problem, and the main reason why Argentina has declined so, is that the military never let Argentinians realize for themselves that they were going down the wrong road. Every time a left-wing president took power and failed, it was they – not the people – who kicked out the president. With respect to Argentina, the great hope for optimism today is that the days of military coups are long over and gone forever.

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9 Responses to How Argentina Fell Behind the Rest of the World

  1. once says:

    Menemism, as well as The Triple A or Isabel Perón, is certainly peronism. Furthermore, Isabel Perón in no way represented a left wing government, in fact it was, in my opinion, as close as peronism ever came to italian fascism. But very right wing, reactionary to say the least. Look into the Ezieza Massacre and the background behind it to understand the political dynamic at the time. I would also add some restraint in your assertion that Alfonsin was loved by all – aside from the impunity granted towards the military, Argentina also faced a recession and growing inflation before Alfonsin left office deflated. Argentina wouldn’t have been better or worse without peronism. We’re talking about a central part of the political identity and culture. To say so is projecting foreign political values and determinants onto this context. Furthermore, Nestor Kirchner is a peronist and the most positive thing that has happened to my country in the last half a century. I guess I mean, when 54% of a society continues to vote for peronism, who is to say that things would be better without it: The only mass who’s opinion matters has spoken; they’ve effectively decided that things are better with…

    Argentina fell behind the rest of the world when it was left out of the post-war restructuring and Marshall Plan – the new world order, so to speak – because of a degree of racism and xenephobia, and more recently it was harmed by the insistance of capitalist power – the IMF and its cronies – to follow its very, very ideologic and doomed economic prescriptions. The default and the rejection of the IMF has actually reinvigorated Argentina. There’s not much evidence otherwise.

    • inoljt says:

      A good response.

      I think that the IMF hurt Argentina and most of the Third World countries it was involved in during the ’70s and ’80s. I also agree that Nestor Kirchner was very good for Argentina. No question about that. And you’re right it’s hard to place Peronism on the left or right; it has aspects of both. After all Perón himself advertised his philosophy as a middle way. Nevertheless, my sense is that it’s generally more left-wing economically.

      Also, I think in hindsight that you’re right that it might be inaccurate to describe Isabel Perón as left-wing. I’ve gotten rid of that adjective.

      But about Peronism:

      Try going to http://www.gapminder.org/ and looking at Argentina’s economic growth before 1943 or 1946 (when Perón came to power) and after those dates. Argentina falls behind the rest of the world faster and faster after the ’50s, only stopping in the most recent decade. I can’t think that you can say that Peronism was good for Argentina with that record.

  2. Ed says:

    There seem to have been some revisions to the essay, which is stronger.

    The U.S. parties are changing. The base of the Republican party is now white working class voters. There have been attempts to deny this in the blogosphere, by playing with the definition of “working class”, but the attempts are increasingly flying in the face of election returns (it should also be noted that in the US most working class people don’t vote, and of course non-whites form a big proportion of the working class and vote solidly Democratic).

    Anyway, it appears that white working class voters aren’t too big on paid vacations for whatever reason. But they are attracted by nationalistic appeals, and also all sorts of promises and statements that to educated voters fly right in the face of reality. In that sense the current Republican party is similar to Peronism. The Democrats are more like the Radical Civic Union, if the Radicals in Argentina had access to a pool of minority voters that would make them more competitive in Argentine elections.

    And actually I think the Republicans will surprise people and develop a genuinely left-wing faction on economics similar to the Kirchners, though it will be delayed because the huge influence of organized money in the US keeps politicians from making economic populist appeals even when it will get them votes. The Democrats are very vulnerable to being outflanked on the left.

  3. Hi Inoljt:
    Interesting post. You should read, if you haven’t done so the classic papers by Braun and Joy and Portantiero on this subject. Beyond the political stalemate, that Portantiero calls the Hegemonic Tie (Empate Hegemonico), there is an economic foundation as noted by Braun and Joy. As the economy grows with the exports of beef and grain, consumption increases and imports too. Higher income implies that workers consume more beef and bread, reducing exports, which together with higher imports lead to an external crisis. That’s what leads to a recession. Mind you military coups were almost always associated with Balance of Payments crisis too. Braun and Joy is here http://www.elgermen.com.ar/Varios/BraunyJoy_68.pdf and Portantiero here http://catedras.fsoc.uba.ar/rubinich/biblioteca/web/aport1.html if you are interested. Also, I’ve written on the topic too: “Downhill or the Long Agony of Argentinean Development,” in Market Liberalism, Growth, and Economic Development in Latin America, edited by Gerardo Angeles Castro, Ignacio Perrotini-Hernández, Humberto Ríos-Bolivar, London: Routledge, 2011. Co-author.
    Best,
    Matías

    • inoljt says:

      Thanks!

      I’m pretty busy right now, but when I have the time I’ll take a look and comment.

      I also see that in your blog you say that Argentinean real wages today are still below what they were in the ’50s. That’s shocking!

  4. Ed says:

    Argentine political history is complicated, but this essay has gotten them mixed up somewhat.

    Peron and the Justicalists or Peronists can be better described as populist instead of left-wing. They have historically been supported by the more working class and less educated voters, but they are in no sense social democratic. Huey Long might be the closest American parellel.

    The Radical Civic Union, or Radicals, was a middle class reformist party. While they were probably what passed for a left-wing party at the time of the 1930 military coup, since then the middle class and at times the military has backed them for not being the Peronists.

    Except for the involvement of the military, there are some parallels to the American political system, with a populist party (Peronists, Republicans), and a party of the educated middle class which is nevertheless associated with some important reforms (Radicals, Democrats).

    Menem, a Peronist, was hailed in the Western press as being relatively pro-free market and pro-globalization, but what he actually embraced was a series of gimmicks. After his presidency, the party system in Argentina splintered, with a genuinely left wing faction of the Peronists now in power.

    • inoljt says:

      I don’t feel totally satisfied with the essay right now, especially its tone, and I’m going to try to edit it soon.

      Edit: But the Justicialist Party certainly would not be the Republican Party! Republicans don’t go calling business elites traitors (vende-patrias). Republicans don’t nationalize state industries. The power base of the Republican Party certainly isn’t the union movement. Republicans don’t pride themselves as fighting for the working-class; they refuse to even recognize that class exists. Republicans aren’t proud of giving working-class people vacations, the right to unionize and work, and higher wages.

      • Also, there is more than one Peronism. The Kirchners and the 1970s left of the party are not similar to Menem neoliberalism or the right wing (associated with López Rega and the Triple A) of the 1970s. More than a party is a front with too many and several contradictory factions.

      • inoljt says:

        But was Menem neoliberalism really Peronism? For instance, the Democratic Party of the 1920s was strongly in favor of segregation, while the Democratic Party of today is led by a black president. Sure they have the same name, but everything else is different.

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