By Diego Sánchez de la Cruz
Image credit: Libre Mercado
Argentina was an emerging country during the mid-nineteenth century and reconverted its institutions following the liberal recipe book. The result was very remarkable, since the Argentina of a hundred years ago was a remarkably prosperous country. However, the evolution since then has been shocking. While the rest of the world has experienced a very important leap forward in terms of development, multiplying by ten its GDP per capita, Argentina has lagged behind, with an increase just three times lower.
Prominent economist Ricardo López Murphy recently spoke about this decline in a talk given at the University for Progress of Chile. “The consequence of having slowed our pace of development has been a remarkable relative impoverishment. We are not talking about an economic collapse like the Venezuelan or the Cuban, but of a marked decline, of a decline that breaks with the world economic trend, which has been overwhelmingly more favorable. When I was young, nobody would have left Argentina to set sail for Spain or Italy. The opposite is happening today” he said.
Former minister Fernando De la Rúa pointed out that «at the beginning of the 20th century, Argentinian GDP per capita was three times higher than the rest of the countries in the region. The standard of living of the country at that time was comparable to that of Canada. However, that relative advantage vanished with the passage of time, as the country moved away from liberal ideas and was seduced by the economic theories of Italian fascism, with a strong interventionist root ».
«The blow to the Argentine economy is explained, mainly by domestic factors: excessive inflation, chronic disorder of public spending, prevalence of protectionist ideas and regulatory excesses. There are complementary international factors, but the decline has been, above all, the product of a wrong economic policy. Above all other elements, the damage to the economy has been especially serious due to the repeated problem of inflation and the chronic inability to adjust public accounts, ”said the rapporteur.
López Murphy recalled that, from 1900 to 1945, Argentina’s average growth touched 3.7% while global GDP advanced to 2.3%. Then, the average inflation level was 1.6%, compared to 1.9% in the United States. «However, the tonic in the second half of the twentieth century has been very different. The growth has been much lower. Prices have been out of control to the point that we have reached inflation levels of 40% during the last decade. And the deficit, which remained more or less controlled until World War II, skyrocketed since then, has lead us to repeated scenarios of very important fiscal breaches.
In the opinion of the president of the Republican Civic Foundation, «the size of the State in the Argentine economy is huge, around 40% of GDP. They are levels that can be financed, not without cost, in European countries that are two, three or four times richer, but we talk about unsustainable levels for the wealth of our economy.
“The capital stock in Chile multiplied by eighteen during the last half century. For that same period, Argentina only tripled its capitalization. The fall in private, domestic or international investment has slowed our development prospects devastatingly. That is why we have become impoverished while our neighbors have enriched themselves” López Murphy explained. “This socioeconomic paradigm leaves us in very worrisome situations. There are provinces where not even 10% of the population plays taxes. The informal employment rate is around 30%. Poverty and rural levels have risen while the rest of the world experienced the inverse trend and reduced these levels” he said.
And what about the future, now that the presidential elections are approaching? “The Argentine government has made several mistakes. From the outset, it has not corrected the fiscal deficits so pronounced that it had inherited from the Kirchner regime. Second, their growth projections were ridiculously high, generating a false expectation of recovery that has increased disappointment and discomfort. Another problem is the application of a gradualist policy, which does not take deeper measures and leaves reforms done. But returning to Kirchnerism cannot be, at all, the solution to these problems, since many of them were generated or multiplied under the governments of Nestor and Cristina”.
This article was published by Libertad.org on August 13th, 2019. Reproduced on Political Hispanic with authorization from said source. Also translated by Political Hispanic.
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