Is the Argentine Economy Going to Collapse?

[Conorworld]

You really can't compare Argentina and America. Completely different cultures and political and constitutional differences. The main thrust of the FT argument and many others based itself around the simple premise that both at the turn of the 20th centuries were big, growing nations with vast natural resources and were magnets for immigration. That's essentially it.

A country is like a business. It's how you manage it that is important. Many nations have done well without having the same noted characteristics that Argentina and the US had at the turn of the 20th century.

Furthermore the 20th century was the most politically and economically turbulent part of the modern era. While Argentina has not been invaded, destroyed or subjected to mass state extermination on a par with say in Europe in WWII it nevertheless was affected and battered nonetheless internally and externally-depression, military coups, revolutionary threats, mass inflation etc. This has created a nation that is reactionary and at times visceral in its responses to threats.

The US is in an unique position. It is a hegemonic power, with the world biggest military and financial arsenal. Due to the unique position of the dollar being a reserve currency it can access loans and make debts that other countries could only dream of. It is entirely different from Argentina.

In relation to this argument about if Argentina's economy will collapse. I think that the massive world economic shocks of the past few months maybe over. From September to March past things were highly unpredictable (they still are to a lesser extent). Almost anything was possible. It might have been easy for a lot of people to say (due to precedent) that Argentina would have been affected but it didn't. That is not to say it wont still! The massive unpredictability maybe over but we are doomed to a long period of sluggish if negative growth. While Argentina and other nations may not suddenly fall the cancer that this economic crisis has unleashed may slowly eat away at some nations.

To be honest Argentina had its bad consumer and government debt period. Unlike nations like my own (Ireland), the US and most notably the Baltic states it is not so hobbled with massive personal debt. Its natural resources this time might have cushioned things a bit. However I would still worry about the economic policies of the present government. It has failed to reign in inflation, still unofficially in double digits (this at a time of creeping deflation in parts). This may hurt the average person and thus lead to consumer anaemia and possibly political conflict. Its nationalizing of private pension funds smacks of desperation.

Personally I am not a fan of the present government's abilities to steer the economic ship of Argentina. I don't think it will lead to collapse but they are certainly not helping things right about now.

Therefore I don't think Argentina will collapse. However nothing is impossible economically in the present climate and the present government's erratic and visceral policies are not helping in this dark art of predicting the outcome.

 

[bigbadwolf]

Fundamentally the two countries have a lot in common, so why not?

No they don't. The USA started to industrialise in earnest after the Civil War and by 1914 was a major industrial power. The same cannot be said of Argentina, which remained agrarian. Furthermore, and as a consequence of its increased might, the USA started down the imperial route by smashing what remained of the Spanish Empire in 1898. In short, the USA was an industrial and imperial power a century ago. Argentina was already not in the same league. Maybe one could compare them in 1850.

 

[fedecc]

Argentina and the US indeed had some comparable point in it's earlier days, but the US was born almost from the first day as a not only rich but a powerfull nation. Argentina had a rich and properous past and good expectations for the future, but Argentina never was, even at its peak, a powerfull nation. I think Argentina shoul be compared more with Australia and Canada rather than the US.

In any case, the FT article is quite good, usually articles about argentina decadence are much more superficial.

The land issue has been long regarded as one of the "original sins" of Argentina by local and foreign historians, and its most likely true. But more important is why both countries took such different paths regarding land distribution. And here we have to keep in mind cultural, ethnical and historical differences. To name a few:

-Argentina inherited the Spanish catholic traditions, while the US had a english protestant traditions. The US was deliberately founded by religious farmers with the purpose of builind themselves a home while the bases of Argentina were desilusioned treasure hunters that lost their way back home.
-Population: while both countries were relatively large and unpopulated. The US population was 20+ millions in the mid XIX cent. and Argentina was less than 2 million.
-Ethnic composition: In the US the distinction between indians and "europeans" was more clear than in spanish america where most people were mixed. This created a profound cultural and psicological difference in both countries. The US society mas more homogeneus, to simplify it, in the US it was "indians vs europeans" while in Argentina it was "indians vs gauchos vs europeans".

All this made Argentina have a diferent land distribution than the US. The gaucho way of life was not compatible with european capitalism, so they were excluded from land distribution by the authorities. In the US the small farmer and pioneers were an integrated part of european society, so providing land to them wasn't a problem.

Another related factor to explain argentine decadence was the civil wars. The US civil war was big and intense but shorter, focalized and with a clear winner. Argentina civil wars spanned through most of the XIX century which delayed the contitution of the argentine state.

 

[MJK]

Maybe it's because the decision makers in Argentina from the beginning were elected mainly because of their wealth as opposed to intelligence, whereas maybe the US had a more democratic system for selecting leadership from the beginning that chose decision makers more heavily based on their ability to make good decisions.

 

[preuben]

"The Economist" is not reliable. it is skewed and biased -- but just not as much as the "Wall Street Journal." On the other hand, the quarterly "Country Intelligence Reports" produced by the Economist Intelligence Unit are a different matter altogether.

I appreciate your opinion concerning the Economist but I think many would disagree with you concering it's reliability and bias. Approximately 1.1 million readers world wide, who on average, have 4+ year degrees subscribe to the Magazine which has mostly all UK writers. It's not (in my opinion) bias or skewed to far on any one side to make that kind of call.

 

[bigbadwolf]

I appreciate your opinion concerning the Economist but I think many would disagree with you concering it's reliability and bias. Approximately 1.1 million readers world wide, who on average, have 4+ year degrees subscribe to the Magazine which has mostly all UK writers. It's not (in my opinion) bias or skewed to far on any one side to make that kind of call.

All media has some sort of bias. With "The Economist," it's a breezy, superficial style that tries to sell a laissez-faire system of capitalism, and brush under the rug some of the problems with capitalism. But then again, this outlook probably coincides with the biases of its readership. I don't think the American counterparts -- BusinessWeek, Fortune, Forbes -- are any better. The most important omission, I find, is not explaining that the whole system relies ultimately on armed force. One of the reasons the USA is a world power and Argentina is, er, Argentina is that the USA has been a formidable military power for over a century. American capitalism is global because of American soldiers and bases all over the world.

 

[harpo]

No they don't. The USA started to industrialise in earnest after the Civil War and by 1914 was a major industrial power. The same cannot be said of Argentina, which remained agrarian. Furthermore, and as a consequence of its increased might, the USA started down the imperial route by smashing what remained of the Spanish Empire in 1898. In short, the USA was an industrial and imperial power a century ago. Argentina was already not in the same league. Maybe one could compare them in 1850.

All nations are different, all economies are different, all things are different. By compariing them we can learn about each through their differences and similarities. Just flatly contradicting someone is a pointless activity.

 

[preuben]

All media has some sort of bias. With "The Economist,"

"I never said the Economist or any other magazine wasn't biased. I merely stated it wasn't slated to far to one side to make the call you've made. Just to be clear about my statement".



it's a breezy, superficial style that tries to sell a laissez-faire system of capitalism, and brush under the rug some of the problems with capitalism. But then again, this outlook probably coincides with the biases of its readership.

"Again, I respect your opinion, I somewhat agree that they may be half truths with your statement".


I don't think the American counterparts -- BusinessWeek, Fortune, Forbes -- are any better.

"I can totally accept this statement and couldn't comment further because I'm not a subscriber to any of these".

The most important omission, I find, is not explaining that the whole system relies ultimately on armed force. One of the reasons the USA is a world power and Argentina is, er, Argentina is that the USA has been a formidable military power for over a century. American capitalism is global because of American soldiers and bases all over the world.

I don't quite get the relationship of this statement to anything we've discussed. I think it's way off base. The crux of our conversation was bias and reliability of a newspaper/magazine Not whether or not military might by and between two nations has any relevance.

This makes me want to ask ...what news outlets do you feel are so reliable and non bias to the point you would call it fair and balanced? I'd like to read some of your sources and make my own decision as to whether or not I would side with your opined statements. Also, I'm curious as to whether or not you're N. American or an Expat from another nation to further help me understand the last rant you had on military might coupled with the USA and it's prowess ( in a negative light).

 

[Recoleta Carolina]

I have never said that Argentina has a standard of living equivalent to Western countries so please do not put words in my mouth.

Yes there is poverty and terrible villas miserias in Argentina and growing crime problems but to make out that we have more chances of collapse than other countries is unrealistic.

Credit and social security is the two main growth engines of western economies and now that that credit is being taken away and maybe in the near future social security most countries in the world will be exactly like Argentina with a wealthy class and a huge underpriveledged class.

The truth is there is more money in Argentina hands that is real cash not credit and combined with the worlds best farming land will guarantee our future.
The risk of default is low and most economists have recognised this of late.
The biggest risk is the US dollar fullstop.....................................................

Pericles,

One thing to keep in mind is that it is true that Argentina has some of the worlds best farming land and other commodities but it does not guarantee a future for the average person. The money really does stay at the top. There is an incredible amount of money in Argentina but it seems to be in a very small pool.

Also, from what I can see there is a big introduction of credit to the local economy such as buying on cuotas and getting discounts at supermarkets if you use your credit card for purchases. At the end of the day it is still buying on credit. It is just the beginning. I expect to see an expanded use of credit in the future.

 

[Conorworld]

There are a lot of differences between Argentina and the US. The US since colonial times has been imbued with a strong, mercantilist tradition, of laissez-faire economic policies. History in Argentina shows this is not the case. Is it a difference in economic policy and tradition the reason? I wouldn't say so but it's an important aspect.

I think the strong aspect of the US is its strong, continuous democratic tradition. Bar the Civil War it has had a continuous, strengthening tradition in its constitution, liberties etc which has almost become part of the DNA of the inhabitants. There is a strong continuity in the US which has given it time to nurture and grow.

Argentina has gone through many crises, the causes being multitude. In many cases the political establishment, constitution, civil liberties etc have been attacked, rescinded or destroyed. It can be fair to say things have been chaotic in Argentine history compared to the US. There is a lack of continuous democracy in Argentina which has not had a time to be fully imprinted onto the whole society. Maybe that is another reason.

So essentially I am just theorizing.