Foreign Correspondent: Explaining Argentina's Decline

Buenos Aires. In previous installments of this column I tried to give REASON readers a picture of what is happening down here, south of Texas and more specifically, for obvious reasons, in Argentina. Now I wish to call your attention to a very good book, Argentina, published in English by an Anglo-Saxon author, H.S. Ferns. Although focused on my country, it offers some insights on Latin American history in general.

The author is Professor of Political Science at the University of Birmingham, Great Britain, writer of a superb account of Britain and Argentina in the 19th Century (Oxford, 1960) and of a pamphlet called "Towards an Independent University" published by the Center for Independent Education. According to the jacket of the book reviewed, Ferns is "one of the leaders of the movement to establish an independent university free of government subsidies and influence." These credentials offer, I believe, a special interest to libertarian readers. Although Ferns is not a libertarian, there is no doubt where his sympathies are.

The author proposes to show "how a free and prosperous commonwealth went berserk" since "politically independent and economically prosperous, Argentina seemed destined to become one of the richest communities in the world and the leading nation in Latin America." In the opinion of the author, "no country in the world including Great Britain so long practiced liberal economic and commercial policies directed to leaving to market forces the determination of what was produced, who produced it, what was invested and where.…" Furthermore, "in its social structure [Argentina] was in practice, if not in theory, more egalitarian and flexible than elsewhere in the Spanish empire."

Then, what happened? Ferns lucidly points out some characteristics which help to explain what went wrong from the very beginning: "[O]ne must bear in mind the vast differences in the political traditions and styles of an English and Spanish descended society; of the subconscious and inherited value systems of communities of which one regards money and business activity as a means to power and prestige and the other regards power and prestige as a means of acquiring money and economic benefits." Then, he proposes another illuminating comparison: "If we can imagine what the United States would have been if the North Americans had attempted to sanction their constitution, organize the Bank of the United States, fight the war of 1812-1814 and work out the effect of Jacksonian democracy all before the year 1793, we can gain some idea of what happened in Argentina between 1821 and 1828. What the North Americans succeeded in doing in half a century, the Argentines were obliged to undertake in less than a decade, and they failed.…"

One reason might be that "what the people in Spanish Viceroyalties lacked and the people in the British colonies in North America had, was experience in selecting legislators and making laws which, within limits, ordered the affairs of society. When the authority of the Spanish Crown collapsed, the Latin American communities…adopted systems of representation based on election, but these systems were simply ideas and not long-established practices and conventional solutions of basic political problems."

Ferns says that "in their relations with European states, the Argentines resembled the Americans, except that in the matter of capital requirements the Americans after their great civil war, were autonomous or nearly autonomous in their capacity to meet their own capital needs and to produce capital equipment."

There, precisely, lies the core of the failure. Was Argentina to attempt the autonomous accumulation of capital needed for development or was the nation to tap the pools of capital overseas? Ferns answers again that "Argentines were not investors in railways or generally in joint-stock enterprises. Their wealth was largely land, and with the prospect of expansion their resources were directed to the acquisition of more land and its development." The great investments needed in the infrastructure at the time were provided, then, by either foreign capital or state funds, thereby creating two overdimensioned sectors in detriment of the national private one.

In spite of that, the Argentine economy grew enormously, its society modernized, etc. but it was a medium-range sort of success, since its base was a very special set of circumstances, which, when they disappeared, became the origin of the decadence. Ferns tells us that "the Argentine economic order and a large part of its productive mechanism were based on the assumption and on the fact of free, unrestrained and competitive international market. Free trade…was not, of course, a universal system, but there was a sufficiently large free market, particularly for foodstuffs, to provide a practical raison d'etre for the Argentine economy. The market for industrial products was less free, but this was of little immediate consequence for Argentina because it was not a producer of industrial products like steel, chemicals and heavy and light engineering.…This free and open society lasted from 1852 to 1930. It depended on a conjunction of world circumstances. When these circumstances changed fundamentally, as they did with the catastrophic economic depression of 1929, Argentina was forced to change."

An important aspect covered by Ferns is the subject of U.S.A.-Argentina relationships. He informs us that "until the great depression of 1929, the economic contacts between Argentina and the United States were not as extensive nor as well balanced as they might have been, and this was due to the unwillingness of Americans to practice the free competition they professed to believe in. On the plane of politics there was antagonism but not rancour. The Argentines resented the American barriers to trade and resisted the American endeavours to claim and to organize through the Pan American Union the leadership of the U.S.A. in the Americas."

To end this piece, let me supply another excerpt: "An industrial society, whether capitalist, socialist or communist, requires constant attention to renewal, to technological improvement and to expansion, and this involves dividing current production between spendable funds for consumption goods and spendable funds for the renewal of plants and expansion of equipment. If this constant attention is diverted too long and resources are directed too completely to satisfying the desire for immediate consumption, upon conspicuous waste, upon war or the preparation for war, the productive system begins to run down, to become less productive.…This happened on a great scale in Argentina during Peron and the nation has yet not recovered.…It is not the result of some legacy of terrible poverty and backwardness into the past. This is precisely why Argentina's experience is so important for others. It can happen in Western Europe. It can happen in the United States of America."