The Wealth of a Nation

“The record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.” ― Milton Friedman

At the end of the 19th century, Argentina’s economy transformed from a frontier backwater, to a growth engine rivaling the wealthiest countries in the world.

At it’s height, the country’s income per capita was comparable to that of France, Germany, and Canada, and reached 80% of the per capita income seen in the United States from 1880 to 1905. Yet today, the country is a frustrating example of bad economic policy, and the resulting stagnation has left the country in an economic slumber for more than half a century.

Argentina’s current economic impotence may be especially stinging for such a fundamentally proud nation; one which still believes in its own importance and potential, yet is forced to face a reality of crushing mediocrity.

Argentina’s economy was driven by the energy of entrepreneurial spirit at the turn of the century. Exports of livestock and other goods translated to a trade surplus, and the country’s GDP and PPP increased to levels unprecedented at the time, and since unseen in Latin America.

Argentina was a powerhouse. It was the envy of the region, and rivaled the best of the world.

Behind this engine, was a foundation laid in place by Argentinian “founding father” Juan Bautista Alberdi. He had been strongly influenced by the revolution which had taken place in the United States, and even modeled the country’s new constitution on that of the fledgling US Constitution. His book, Bases for the Political Organization of the Argentine Republic, came at an opportune time just before the overthrow of a militaristic leader who came to power in a wake of violence following independence from Spain.

Juan Bautista’s treatise and guide for Argentina was founded on visions of free markets, liberties, and was very much focused on a different ideal for progress. He envisioned a future driven by the energy of free markets and and powered by the mind of man as an alternative to the violent past of revolutionary South America. As a matter of fact, Bautista specifically called for “free enterprise.” He dreamed of a nation where, ” liberty of commerce, railroads, the navigation of our rivers, the tilling of our soil” were the rights of all Argentinians, and clarified that those rights were not to be in place of traditional liberties, but as a means of assuring and securing them. Juan drew his inspiration from the world around him, and could see the value of progress created by the self-interested citizen.

Noted English economist Adam Smith crystallized the value of the self-interested citizen when he observed that, “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” If Bautista was not familiar with Smith’s axiom, his policies paralleled Smith’s concepts.

And this was the lynchpin of Argentina’s success. Government served it’s purpose to guide the new nation, but its role was to support, rather than interfere with commerce. Interference from politicians in the free exchange of goods and services in this primitive economy were few and far between, and taxes were minimal as required to support the processes of the Argentinian government. There were no income taxes. Argentina could have been a model example of Adam Smith’s prescription.

The results were exceptional, and injected the country with thriving commerce; the results of which are still observable to this day through many of the fantastic classical buildings in Buenos Aires which largely spring from this era of growth.

Investments flew into the country, and growth surged. Railroads began to crisscross the fertile nation, and immigrants from across the world looked to the Río de la Plata with hopes of a better life. Buenos Aires had become the second largest city on the Eastern seaboard after New York City, and by the outbreak of World War I, per capita income in Argentina exceeded the respective per capita incomes of Spain, Italy, Sweden, and Switzerland.

What ended this unprecedented growth and progress in Argentina, was not an outside threat, but the result government policies increasingly restricting and placing a heavier burden on free enterprise.

At the turn of the century, Argentinian politicians began implementing social reforms and overtaxed for those programs. Increased revenue lead to even larger programs which began to pull down the economy.

In 1931, a coup d’état caused Argentina’s success story to come crashing to a stop. A series of leaders were successively replaced until 1946 when Juan Perón took the reigns of leadership. In many ways, the damage had already been done. Perón furthered damaging policies, and the laissez-faire policies inspired by Adam Smith which had inspired a populace to rival the world in productivity, were subjected to the popular economic philosophies of the day which more closely aligned with John Maynard Keynes and careened quickly into socialism and fascism.

In most ways, the nation would never recover it’s past glory.

Starting in 1945, the 10 year administration of Juan Perón began nationalizing industries and services which were previously run by private interests. the government took center stage, and controlled the previously natural impulses of the economy. Rampant inflation followed these fascist policies. Growth from the 1960s was undercut by the corrupt

and disorganized economic policies during the military dictatorship from 1976 to 1983. In 2002, Argentina defaulted on its debt; no longer able to make interest payments.

Today, the economic situation is foggy at best, and there is considerable concern for personal liberties. For example, the government of Cristina Fernández nationalized print paper indirectly controlling the press.

And so, rather than self correcting to move back toward the policies that fostered so much progress and wealth a century ago, administrations since have been moving towards more control and centralized government. Ever increasing authoritarian controls from the Argentinian political machine are proving American economist Milton Friedman’s axiom in which he observed that “underlying most arguments against the free market is a lack of belief in freedom itself.”

Indeed, a lack of belief in freedom may be the only thing holding the country back.