A Sorry History of Statism and Inflationism
Early in the 20thcentury, Argentina was fully developed by the standards of the time, and the 5thrichest nation on earth in terms of per capita GDP. Then several generations of Argentine politicians (which included, off and on, the armed forces) proceeded to squander it all.
The main reason for Argentina’s downfall from an economic point of view is that its politicians first thought they had to reverse the gains made during the era of liberalism as thoroughly as possible. They did so by nationalizing vast swathes of industry and introducing socialist as well as fascist/militarist economic policies in alternating fashion. Then, whenever the predictable economic failure could no longer be denied, they invariably turned to the printing press to bail them out.
This mixture of statism and inflationism managed to squander so much capital with such unwavering regularity that Argentina eventually became the basket case it remains to this day. Have its politicians learned anything at all from this? Of course not. The main claim to fame of the country’s current minister of economics Axel Kicillof is that he “reinterpreted Keynes from a Marxian perspectiveâ€. He was incidentally one of the principal architects of the expropriation of YPF. Just what Argentina needs like a hole in the head in other words, yet another statism-infested high IQ moron. Argentina is so rich in natural resources that it should by rights continue to be a highly successful place, but as so often, it is the political and economic policy backdrop that is the decisive variable. All that its natural riches have done for Argentina was to avert its complete collapse, while allowing its ruling classes to go on squandering its resources.
The root cause of Argentina’s decline from being one of the richest nations in the world to becoming practically a third world poorhouse: incessant inflation coupled with statist economic policies – click to enlarge.
Argentina’s per capita GDP as a percentage of US per capita GDP over time. The most recent downturn is not yet shown on this chart – click to enlarge.
The current government of president Fernandez-Kirchner pursues policies that are very similar to those that have so successfully ruined the country over the past century. It continually inflates the money supply, pursues economic autarky, expropriates foreign investors, has introduced a harsh regime of capital controls and actively persecutes anyone who dares speak up about the lies it is promoting with respect to economic statistics (chiefly the speed at which the currency loses its domestic purchasing power, which is about 3 times faster than the official data admit).
