A story of frustration and schizophrenia

Buenos Aires Herald. 21 de mayo de 2016.

The 1853-1928 progressive era came to an end when governments decided that people had to lose their individual rights and the decline started.

Argentina is preparing to celehe bicentennial of independence from the Spanish Empire. A century ago, the economy and society faced the best moment in its history.
The last 90 years have been dramatic although we haven’t suffered major wars, beyond the civil war between 1820 and 1853, massacres or catastrophes. Argentina is a country of general peace (the peace of cemeteries).

However, after an encouraging start (1853-1928), Argentina has entered a 90-year decline of stagnation and madness.

It is useful to divide Argentina’s history in three major periods. The first one, between 1816 and 1853, characterized by a long civil war and discontinuous attempts to economic and political reforms, could not develop stable conditions for progress and business. The second, between 1853 and 1928, represents a period of progress and growth, where the foundation of a modern state made Argentina become one of the richest nations in the world. Finally, the longest period in our history between 1928 and 2016 — 44 percent of the total —, marked by decline, stagnation and madness.

Orlando Ferreres’ book Dos Siglos de Economía Argentina (2010) argues that in 1910 Argentina’s per capita income was equivalent to 82 percent of the US per capita income, the richest nation in the world and 88 percent of the UK’s, the centre of the industrial revolution. In our neighbourhood, Argentina had a per capita GDP five times higher than Brazil’s and 2.5 times higher than Mexico’s. Today our per capita income reaches only 23% of the US and we can expect a worse situation in the future.

When we celebrated the centennial of the May Revolution in 1910, Argentina was one of the richest nations in the world and was the main destination for European immigrants in relative terms. This was because opportunities in new Argentina allowed economic and social progress.

The key to economic and social development of Argentina was based on four main arguments synthesized in the slogan of conservative Julio Argentino Roca’s presidency: “peace and administration”

a) Private property
b) Free trade
c) Education
d) Low taxes

A well-known Spanish writer, Vicente Blasco Ibáñez, wrote in Argentina y sus Grandezas (1910): “No country in the world (in relation to inhabitants) spends as much as Argentina in the promotion and diffusion of teaching. There are provinces that spend one third of their budget in education.”

According to scientist Francis Korn, an anthropologist at the Conicet (Consejo Nacional de Ciencia y Técnica), in her book Buenos Aires, Mundos Particulares, 2004, we find that between 1887 and 1914 homeowners grew nearly 400 percent more than the population. This is evidence that real wages in Argentina, in the early twentieth century, were higher than in several European countries and led to savings.

Another sign of welfare was the construction of Buenos Aires’ underground in 1913. This was the first subway in Latin America and the seventh in the world, after countries like the UK, US, Hungary, France, Germany and Greece. Even more, during 1876 The Buenos Aires Herald was being founded, the second English-speaking newspaper in Argentina.

From 1928-1930 schizophrenia took possession of our country. Argentina began to close the economy and increased the role of the state in the economy. Since then the market has been ignored and replaced by corporativism and populism. In other words, people lost individual rights.

It is a common mistake to attribute the beginning of the decline to Peronism. This statement is false because the conservative governments of the 30s created institutions that limited the actions of the market. Among others we can mention the Grain Regulatory Board or the National Meat Board and exchange controls among others.
Subsequently, the military, Peronist and Radical governments only deepened interventions nationalizing foreign trade, the banking system and initiating the monetary financing of deficit generating chronic inflation and poverty.

On average, conservatives, Peronists, UCR and the military did more to magnify the decline by generating macroeconomic instability. In this environment, long-term business became unprofitable and capital left the country.

Only when politicians, from left to right, recognize that they are the cause of the problem will we be able to leave the bottom of the hole. Meanwhile, poverty will grow, the economy will remain stagnant and opportunities will be lost day after day.

We need to return to free trade, respect for private property, modern education and smaller state. But there will be no free lunch for many people who may lose their privileges.