Argentina’s Slow-Motion Disaster

That decline is nothing short of remarkable. On the eve of World War I, Argentina was richer than France and Germany. But after World War II, it entered a period of populism and dictatorship, punctuated by political violence and hyperinflation. The Galtieri regime fell shortly after Argentina’s defeat in the 1982 Falklands war, but the return of democracy was not enough to help the country escape another episode of hyperinflation in 1989. Nor was it enough to prevent a historic debt default in late 2001.

According to the narrative promoted by Kirchner and her left-wing supporters, Argentina’s default was a result of free-market economic policies. But that’s nonsense. As journalist Michael Reid has explained, “What killed Argentina’s economy in 2001 was not ‘neoliberalism’ or the free-market reforms, but a fiscal policy incompatible with the exchange-rate regime, and a lack of policy flexibility.” Indeed, the policy mix that triggered the crisis “was in direct contravention of the Washington Consensus.”

Today, after several years of appallingly bad economic mismanagement, Argentina is facing yet another looming crisis. For now, high commodity prices are camouflaging a slow-motion disaster. But those prices won’t stay high forever. And in the words of Daily Telegraph commentator Jeremy Warner, the country “is once more an economic basket case.” Sooner or later, its next crisis will erupt.

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