Don’t Cry For Me Argentina
Don’t Cry For Me Argentina
Our beloved Nigeria once again faces that epochal moment in its political cycle when the cloven hoofs of history are sharpening their knives and waiting in the outer darkness. Boko Haram had a field day the other week, with much harvest of blood and tears and the silent despair of a traumatised people. In spite of the hype, the economy is stuttering and people are desperately unhappy. The naira and the financial markets have nose-dived in reaction to the unceremonious exit of former CBN boss Lamido Sanusi. Some people, it would seem, had had enough of the talkativeness and outlandish two-horned turbans of Dan Majen Kano.
If our leaders want to learn how to bring down an economy, they should hire a charter flight to the South Atlantic nation of Argentina. It takes knowledge, science and political wisdom to build a great country. But it takes spineless leadership and collective folly to bring it to ruin. At current path dependence, we may be heading for a quantum implosion.
This is why the lesson of Argentina is of such capital importance. The Latin American country is a land of breathtaking beauty; from Patagonia in the south to the gilded palaces of Buenos Aires. The Argentine capital reminds one of typical old-world cosmopolitan cities such as Florence, Prague, Madrid and St. Petersburg. Pope Francis comes from that country as do football legends Diego Maradona and Lionel Messi. Ernesto Che Guevera was an Argentine. He was one of the idols of my youth, as he was for many of my generation.
One of the greatest economists of the twentieth century, Raul Prebisch, of the famous Prebisch-Singer Thesis, was an Argentine. He came to give a lecture at the University of Ottawa in the spring of 1986 when I was a desperately home-sick intern working with the Commercial Attaché of the French Embassy in that city. Poet and essayist Jorge Luis Borges was a noble Argentine and a man after my heart. A lover of books myself, I was enchanted with him when he wrote that heaven must be a glorious city full of libraries. Whether in the sciences or in the arts, Argentines have acquitted themselves with class and panache.
Argentina also provides a classic model of how to run down a great country. In the 1930s and 1940s, it was one of the richest countries in the world, at par with Britain and Switzerland, and ahead of France, Spain, Brazil and Germany. During the 1890s up to 1914, the country had registered the fastest rate of economic growth in the world, exceeding an annual average of 6 percent. Argentine agricultural and raw material resources were in demand all over the world, bringing immense prosperity to its people.
Over the past fifty, however, the country has been in continuous decline. Decades of military dictatorships coupled with democratic populism have led to hyper-inflation, banking collapses, capital flight and fiscal crisis. In January 2010, President Christiana Fernandez de Kirchener booted out central bank Governor Martin Redrado when he rejected her orders to transfer US$6.6 billion to settle some of the country’s external debts. The disgruntled Redrado has been going about badmouthing the government. The currency, the peso, has been devalued by more than 40 percent. Capital flight has become the norm. Infrastructures are decaying and electricity blackouts are common. Argentines no longer believe they have a future to look forward to. President de Kirchener herself has been crippled by illness. The government has lost its bearings. Argentines used to look down their noses at their neighbours. Today, Brazil, Uruguay and Chile are having the last laugh.
Some would argue that Argentina remains a high middle-income country that has seen significant improvements human development. The government has paid off its external debts to the Paris Club. Until recent years, growth had exceeded an annual average of 5 percent. However, Argentina’s secular decline has been going on for so long that nobody believes it is not irreversible. Several factors account for the country’s economic decline.
First, Argentina’s prosperity was historically based on export of commodities. When there is a commodities boom, the country prospers. But when there is a global crisis, it suffers. Manufacturing has grown significantly over the last two decades, but not fast enough to ensure structural diversification of the economy as occurred in Chile or, indeed, Malaysia and Australia.
Secondly, the issue of dollarization of the economy is a major stumbling block. The rich people of Argentina prefer to keep their assets in dollar denominations. It reached a point that the dollar became a parallel currency with the peso, exposing the economy to the vagaries of the American industrial juggernaut.
Thirdly, Argentina, unlike Brazil and Chile, did not evolve strong economic institutions that would promote robust pro-poor social reforms. Economic science shows that such policies spur growth while ensuring common prosperity. The landed gentry in Argentina remain a powerful force against major social reforms. And because they ultimately call the shots, it is evident that the structure of national politics would be characterised by division and strife. Populists such as Juan Domingo Peron and his wife Evita Peron rode on the populist bandwagon which pleased the mobs but ultimately stifled growth while engendering hyper-inflationary spirals. The administration of President Nestor Kirchner, who was succeeded by his own wife, Christina Fernandez de Kirchner, reverberates with echoes of the populism of the Peronista years.