The Economist this week features Argentina’s so-called ‘one hundred years of ineptitude‘. It explains the rise and fall of Argentina from being one of the richest in the world in early twentieth century towards a country of uncertainty, poverty and inequality. During its liberal years between 1880s and 1920s, the country ranked among the ten richest in the world – quite comparable to Australia, UK and the United States and certainly ahead of France, Germany and Italy. Its income per head was 92% of the average of 16 rich economies.
The article goes to explain the somewhat odd economic history of the country: it was riddled with popular coups and clientelistic politics; over reliance on primary commodities notably wheat, beef, and export agriculture; and the near absence of a coherent development project that could have sown the seeds of industrialisation. To some extent, the country’s democratisation was almost antithetical to long-run growth, as The Economist neatly shows in the figure below. In one of my conversations with my colleague, Jean Grugel, she points out that the problem of Argentina is that the state could never be able to exercise political autonomy – and indeed has been incapable of establishing effective institutional and economic reforms – without Peronism. The popular imaginary of a welfare state espoused by Peronist governments over the century has allowed elites to mobilise political support for economic policies that can sometimes actually produce the opposite effects of the intended reforms.
Clearly, as the article recognises (and cites Acemoglu himself!), the central variable that spells success and failure of development in the Third World is political institutions that can either create lasting legacies of commodity-dependent development or leave a dent at a critical juncture to usher a new era or paradigm of economic thinking. My colleagues have suggested that Argentina is indeed one of the emblematic cases of post-neoliberalism in the region – the renewal of a political-economic thought based on reviving the economic role of states in development and an emphasis on citizenship and social mobilisation as a fundamental character of a new form of inclusive politics. But at a time when the commodities boom is nearly ending, there are questions lurching as regards whether this model of growth is really sustainable.
The future of Argentina and its commodity-led growth remains uncertain. Some argue that there maybe some indications of a national industrialisation strategy that could sustain the unusual economic recovery of the country (and the region) in the post-2000 context. Others, however, remain skeptical given that redistributive conflicts are escalating as Cristina Kirchner decided to nationalise vital industries for ‘strategic’ reasons as well as control inflation through short-term measures. The limits of a statist political economy is indeed showing signs of fragility and uncertainty. The country’s future is set to be changed by the discovery of the third largest shale gas field in the world. But whilst the fortunes of Argentina look promising given the potentially vast windfall profits to be accrued in the next ten years, I am not sure the dependent model of development is unravelling. It maybe the case that Argentina is following the tragedy that Terry Karl describes as hindering long run growth and institutional development among petro-states, notably in Venezuela. Resources are great. Natural endowments provide fortunate states with some ‘beginner’s luck’ in the world economy. But in a world order characterised by financialisation and complex interdependence, commodities are not enough to bring about growth and social development. States and national elites must think about how to use these resources to create new comparative advantages, and in the process overcome commodity dependence. At this important critical moment, only if Kirchner will address the more difficult and complex reforms needed for the structural transformation of the economy will she end the country’s one hundred year of ineptitude.