Observatorio argentino 26: How long has Argentina been in decline?

Randy McDonald brought this article to my attention. The title captures the argument quite well: “Argentina: The Myth of a Century of Decline.” The author is contesting an Economist article that dated the country’s decline to 1914.

Here is the key argument:

Below I will try to show that instead of a “century decline,” what characterizes Argentina’s economic evolution as compared to other countries is that it suffered a deep economic collapse from the mid 1970s to the end of the 1980s (in what follows, data is from the Maddison Project. http://www.ggdc.net/maddison/maddison-project/data.htm).

This structural break in the evolution of the GDP per capita (GDPpc) in Argentina can indeed be attributed to internal conditions in that country. But other than that, there is not much difference in the evolution of Argentina, when compared to, for instance, Australia, or Uruguay, two countries mentioned by The Economist as either not having suffered the “hundred year decline” and/or to have followed better economic and institutional policies than Argentina. It is true that other countries such as Korea or Spain, which had far lower GDPpc than Argentina during great part of the 20th Century overtook Argentina by a large margin since the 1970s. But it is also true that if Argentina had avoided the sharp drop in the 1970s and maintained the share of the US GDPpc that prevailed before that structural break, the country would have had now an income per capita above all countries in LAC and many European countries such as Portugal, the Czech Republic, Hungary, and Poland. And if it had maintained the lineal trend growth from the 1960s to the mid 1970s it would be now at about the level of New Zealand or Spain, according to the data of the Maddison Project. In other words, if Argentina had avoided the real tragedy that started in the mid 1970s, the country would be now a developed country.

I’m not sure I fully understand the argument. It hinges on a rhetorical definition of “decline” and a debate over the correct counterfactual. Contemporary Argentine opinion leaders thought their country was one of the richest in the world in 1914. Now, the author is correct that compared to Australia it was already running significantly behind (66% of per capita income) ... but Argentina had achieved a rather respectable 82% of Canada’s per capita income. 

Still, 82% is less than 100%, even accounting for the difficulty in measuring these things. And there are other indicators that Argentina was in fact already behind in 1914 despite its elevated income figures. Filipe Campante and Ed Glaeser have a good comparison of Buenos Aires and Chicago around 1914. The differences?

1. Much higher education levels in Chicago. This was not in fact a result of Chicago’s public schools, although those schools were better and more prevalent than in Buenos Aires. Rather, it was a product of Chicago getting rural Americans and German immigrants, who were better educated than the Spaniards and Italians pouring into B.A.

2. Chicago was more industrialized, despite competition from the old industrial centers in the American northeast. In fact, businesses in general were more mechanized: Chicago had 2.4 times as much capital per worker as B.A.

3. Finally, Argentina didn’t have universal male suffrage until 1912 ... which led to riots and revolts that could and did topple national governments. Chicago had riots and political machines, but the government remained stable.

Thing is, the Economist piece makes a big deal of the Campante and Glaeser article. Why is Díaz-Bonilla different?

Díaz-Bonilla points out Argentina did not start to lose further ground against Europe until WW2 ... and he notes that fate also befell Australia. The problem is that much of Australian economic history is dedicated to explaining the country’s relative failure after WW2. Comparisons with Argentina were rife at the time as both countries slid down the league tables. I am not sure what the Australian experience proves for Argentina.

Finally, he shows that the wheels come of the slowing Argentine bus with the spectacularly incompetent military governments of the 1970s.

I understand what the author is trying to argue, but it’s not as effective as it might sound. “Argentina was poorer than people think in 1914, fell further behind (along with Australia and Uruguay) after 1940, and then collapsed in the 1970s” is less catchy than “one hundred years of decline,” but it doesn’t sound categorically different.

I think the author is trying to push the argument too far. 

That said, the author makes two good points. First, the Argentine juntas really were that bad. Second, the relative decline after 1914 cut across the entire southern cone, including southern Brazil. The whole region was relatively richer in 1900 than it is today. Brazilians in particular seem to forget this point, but it is an important one to remember, especially when diagnosing Argentina’s modern economic problems.

Comments

[Jonathan]

Can you explain in more detail the importance of the Conosur being relatively richer in 1900 than today?

Also, why do the Observatorio Argentino posts have numbers, but not ones about other topics?