What happened to Argentina?

http://economix.blogs.nytimes.com/2009/10/06/what-happened-to-argentina/

by jseliger • 17 years ago

84 59 17 years ago

economix.blogs.nytimes.com

tokenadult2• 17 years ago

This is an important issue to discuss, because the bad economic ideas that hobbled Argentina's growth (protectionism) are still current in many other countries.

The graph about percentages of the population in primary schooling is quite interesting, and goes a long way to explain why Taiwan, poorer than Zambia within my lifetime, is now much wealthier than most other countries in the world.

vitaminj• 17 years ago

The idea that protectionism is bad needs to be qualified. Whilst the successful Asian countries that are cited here (eg. Japan, Korea, Taiwan, etc) are export-oriented and encouraged trade, they were all quite protectionist early on. Big companies like Toyota, LG, Hyundai, Samsung were all heavily subsidised by their governments in the early years, and were aided by other protectionist measures (such as local content requirements, import tariffs, etc). In these cases, protectionism served a purpose - which is to protect local industry until it is globally competitive (ie. infant industry protection).

Notwithstanding, these protectionist policies don't always work out (eg. see Indonesia's airplane industry). Furthermore, Korea and Japan have had (and still have) an extremely difficult time reversing protectionist policies due to the lobby groups that represent the vested interests of the now successful companies.

michaelkeenan2• 17 years ago

Are there any well-regarded economists who think the infant industry argument is a good argument?

Mankiw mentions it briefly in The Principles of Economics[1], which if I recall correctly is the most widely-used economics textbook, saying "Economists are often skeptical about such claims, largely because the infant-industry argument is difficult to implement in practice...many economists are skeptical about the infant-industry argument in principle...Protection is not necessary for an infant industry to grow."

Paul Krugman spends a few pages on it in International Economics: Theory and Policy[2], saying "The infant industry argument seems highly plausible, and in fact it has been persuasive to many governments. Yet economists have pointed out many pitfalls in the argument, suggesting that it must be used cautiously.

First, it is not always good to try to move today into the industries that will have a comparative advantage in the future...Second, protecting manufacturing does no good unless the protection itself helps make industry competitive

...

More generally, the fact that it is costly and time-consuming to build up an industry is not an argument for government intervention unless there is some domestic market failure. If an industry is supposed to be able to earn high enough returns for capital, labor, and other factors of production to be worth developing, then why don't private investors develop the industry without government help?

...

In practice it is difficult to evaluate which industries really warrant special treatment, and there are risks that a policy intended to promote development will end up being captured by special interests."

[1] Mankiw's textbook: http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&#...

[2] http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&#...

laut• 17 years ago

Argentina is a good example of how much government can screw up a country. The anti-capitalism regime is not attractive for new investment, local or foreign, and existing capital flees the country. I live in the region and see it with my own eyes.

Protectionism is bad. The reason it's still here is that individual politicians and rent seekers can still benefit at the expense of the rest of society.

Protecting local industry until it is globally competitive is not a good idea and not without costs. Economists have known about this for centuries. Look at the work of David Ricardo. Do you think Ricardo is wrong, since you don't think protectionism is bad?

confusedcitizen4• 17 years ago

This is another economist trying to beat the capitalistic drum. Apart from Peron's protectionist policies (which some call a drive toward self-sustenance), one shouldn't forget contributing factors like the 1948 exclusion of Argentina exports from the Marshall Plan by the Truman administration. Peron might have been mistaken on many counts, but so many things are ignored behind the veil of apparently protectionist policies, like worker protection and upliftment, social infrastructure growth, etc.

What a myopic article, so many things are ignored, he's trying to put blinders on us.

jseliger2• 17 years ago

"Apart from Peron's protectionist policies (which some call a drive toward self-sustenance)"

Trade protection and autarky have long been defended by words like "self-sustenance," and the like, but such policies have never turned out well: just ask India and China before they modernized and liberalized their economies.

"Peron might have been mistaken on many counts, but so many things are ignored behind the veil of apparently protectionist policies, like worker protection and upliftment, social infrastructure growth, etc."

Maybe: but by virtually every metric, Argentina is now worse off than countries like Spain and Italy, which have (relatively) liberal economic policies and relatively high rates of education.

alecco3• 17 years ago

Menem, a peronist president in the 90s, undid many things Peron did. His government was a poster child for deregulation and what's called neo-liberalism. They privatized almost everything in a ruthless manner. The crisis of 2001 was a consequence of all those policies.

I am against publicly owned corporations and services but I'm against raw short-sighted capitalism, too. Some of the privatized public corporations had operating surplus, were not monopolies and were worth billions. Those were given to foreign investors who bought them taking credits over the same assets bought. Then proceeded to raise prices, perform massive layoffs, and vacuum capital to service companies owned also by those same investors.

I am quite against socialism (left or right) but you clearly lack knowledge on Argentina. The country is far more complicated that you might think.

confusedcitizen4• 17 years ago

"...just ask India and China before they modernized and liberalized their economies."

Well, modernization and liberalization of economies have increased the economic divide in India. It's not that liberal economic policies are wrong, just that their implementations are always skewed by greedy corporations. A government's responsibility is not only to cater to cash sinks but also the people they govern, which especially in India, is the poor majority. Of course the GDP goes up, there is no question about that. But at what cost?

tayssir• 17 years ago

Actually, Ha-Joon Chang pointed out that the economic powerhouses (US, UK, Japan, etc.) relied on enormous protectionism when they were developing. However, now that they're powerful, they "kick away the ladder" and push developing nations to struggle under the ineffective free-market principles that they knew to avoid. http://www.newamerica.net/events/2008/why_world_isnt_flat

alecco3• 17 years ago

Extremely myopic, indeed. Peron was an authoritarian and a demagogue, but he improved most social indicators of the country. Sure, GDP diminished but that was part of the cost to make Argentina an industrialized nation. Also the infrastructure of the country improved significantly.

IMHO, it's quite hard to understand a right-leaning socialist government from the point of view of a US citizen. There's no reference.

roc• 17 years ago

If education was truly that bad, I have a hard time seeing those improvements as social ones. They seem more like a side effect of strong authoritarian policy.

I don't buy the article's explanations thus far; though it appears to be one of a series and I look forward to reading more.

But I also am not swayed but your assertion that progress in a socialist country is too alien for we crass capitalists to gauge.

Perceval• 17 years ago

I don't think it's that difficult with proper reference to historical examples. The first socialist welfare programs in Europe were instituted by authoritarian, nationalist, militarist Prussian leadership shortly following the unification of Germany. It was part of Bismarck's strategy to undercut the republican reformist sentiment left over from 1848, and bind the common people to the state through conservative handouts.

Another interesting book looks at the welfare programs instituted in Nazi Germany as part of their corporatist 'third way' economic system (supposed to avoid reliance on free trade industrialism and inoculate against cosmopolitan bolshevist appeals): http://www.amazon.com/Hitlers-Beneficiaries-Plunder-Racial-W...

Right-leaning socialism was the original socialism in practice in Europe.

philwelch• 17 years ago

"Sure, GDP diminished but that was part of the cost to make Argentina an industrialized nation."

That sentence doesn't even make sense. The whole point of industrialization is to boost economic output. That's what it does almost by definition.

noodle2• 17 years ago

i agree.

there's a lot of issues in the history of argentina that are brushed by in an attempt to make this a simple economic policy debate.

for example, they were quite politically unstable. there was a coup in the 30s, 40s, 50s, 60s, and 70s. the ruling military government died in the 80s after a brief war. a prosperous economy is difficult to foster without a stable governmental structure, regardless of what that structure is.

gojomo• 17 years ago

But might the political instability also be a symptom of the educational level?

(Anyone want to plot education-in-1900 vs. coups-in-20th-century?)

petewarden2• 17 years ago

What surprised me about the article was that I didn't see much 'capitalist drum-beating'. His argument is that the performance of Argentina versus the US can be entirely explained by education levels. Schools are typically provided by the government, and the idea of universal education was initially regarded as a radical one, often associated with early socialists.

I'm not sure if I agree with the hypothesis, but I'd rather hear a specific counter-argument. Your condemnation seems more suited to a rebuttal of the typical 'Argentina is poor because it's socialist' idea.

confusedcitizen4• 17 years ago

In fact, he does mention Peron's protectionism being a root cause (along with depression and wars) for Argentina's financial woes today. He states that protectionism, regulation, large state enterprises (which are anti-capitalistic themes) have never been 'particularly good for growth'.

I feel he does start of with the capitalistic premise. Only later is education hypothesized as a major culprit.

diego3• 17 years ago

The problem with the argument is that it doesn't explain Argentina's performance when compared to all the countries with worse education levels (which are the majority).

forinti• 17 years ago

I think the author was looking at too small a window into Argentina. It still is a pretty decent place to live and it will probably capitalize on Brazil's new growth spurt. Look at the most populous area, Buenos Aires, which has 1/3 of the population and an HDI of 0.923. It's a first world score.

I think Peron was quite positive, and the author forgets to note that before him Argentina was controlled by English companies who took the best part of the profits from the beef industry.

raphar• 17 years ago

In my opinion Argentina is cursed more for its lack of direction than a deficit in education. During the 20th century (and 21th) its has been a common practice to destroy or undo the previous administration efforts.

Almost every group that had governed Argentina, gained power, rebuilt everything (laws, institutions, education...) until it got replaced or defeated.

A century of this, has left the country walking in circles, incapable of taking advantage of the oportunities that had appeared, and that might had improved its situation.

Nevertheless I don't lose my hope in my beloved country.

diego_moita2• 17 years ago

As a Brazilian I agree because I see it happening here.

But I believe that it is also related to education. Uneducated people are the ones that elect the most corrupt/incompetent politicians and are the ones that never understand discussions about policies.

Off-topic: hope you guys get to the Worl Cup ;-)

diego3• 17 years ago

Argentina is (and has been) doing better than Brazil by pretty much any indicator of education, but Brazil has obviously done much better in terms of economic development.

http://www.nationmaster.com/country/ar-argentina/edu-educati... http://www.nationmaster.com/country/br-brazil/edu-education

Argentina's education was world-class for a significant part of the 20th century and is still pretty good. Unfortunately the article didn't provide any evidence or citations to back up its hypothesis.

"Uneducated people are the ones that elect the most corrupt/incompetent politicians and are the ones that never understand discussions about policies."

For starters, Argentina had many governments that were not elected by the people. Second, can you prove that educated people always make the choice that's best for the country? Third, there are abundant counterexamples of dictatorial countries that did great in terms of their economics and industrial development.

Like other people said, Argentina's problem is not education but the lack of coherent policies over the decades.

joeyo2• 17 years ago

Education (alone) is not sufficient. Look at Uruguay.

(Uruguay had one of the highest rates of literacy and school enrollment in the Latin Americas.)

timothychung• 17 years ago

A point on Human Capital: From what I learned, developed countries (and companies) depends much more on Structural Capital and not Human Capital in long run.

Human Capital is seen as a risky asset due to its volatility. From a intellectual capital management perspective, my guess is that Argentina has not been successful into converting its Human Capital into Structural Capital.

Education is one of the tools of such conversion. With my limited knowledge, policy and society design are the high level effective tools for the job.

ckinnan• 17 years ago

A better comparison than Chicago is Argentina's neighbor Chile, which is far less endowed than Argentina and has been poorer historically. Chile, however, has pursued market economics since the 1980s and now enjoys a living standard that is more than twice as high as Argentina.

Indeed, Argentina's per capita income today is just $6,500, despite the nation's amazing cultural and natural gifts. Argentina is, in fact, highly literate-- I don't think that explains why it has stumbled.

joeyo2• 17 years ago

Market economics? Is that what Pinochet's regime is being called now?

mediaman2• 17 years ago

Do you disagree that Chile has developed much more market-oriented economic policies than Argentina?

If not, what is the point of your comment?

If you do, I'd be interested in your perspective beyond this quip, particularly your thoughts on the Chicago school's involvement in forming economic policy there.

NathanKP2• 17 years ago

From the article:

Long-run national success is built on human capital, both because of the link between schooling and technology and because of the link between education and well-functioning democracy.

That is a fairly profound statement when you consider the general state of the American educational system. I never fail to be amazed at how poorly US college and university systems are run. They are full of bureaucracy and little good teaching is done.

bdotdub• 17 years ago

While it's true that we can see how poorly the American system is run, how does it compare to the rest of the world?

I don't know much about the subject, so I'm hoping to get a bit more insight into this.

I suspect that even if our system isn't great and as good as it could be, it's still has a leg up on most education systems out there

NathanKP2• 17 years ago

Perhaps it is much better than the educational systems in third world countries, but compared with the European educational system Americans are definitely behind. Or course being an American myself it may just be a case of "The grass is green on the other side of the fence." However, from what I have read they definitely seem to run the colleges better in Europe.

miked3• 17 years ago

I'm an American who's traveled in Europe a fair bit. I've had several conversations with Greek, Swedish, and Hungarian teachers. All were universally critical of teaching in their countries, the main thrust being that it was almost all driven completely by rote. Teaching in greece was so bad that a large number of families hire outside tutors just to teach things like English and classical greek and latin.

There's a Chinese institution that publishes a comparison of all the world's major universities, based on number of paper citations to its faculty. It's been a while, but US universities held all but 2 positions in the top twenty (Cambridge and Oxford were the only non-US universities). Research is not the same as learning, but its probably as good a proxy as we've got.

Two other proxies would be number of Nobel prizes and number of patents issued. At least in absolute numbers, the US does quite well. Not sure about the more relevant per capita numbers, though I'm certain Israel would crush in the patent category.

While I largely agree with your statement in broad terms, it's too sweeping and doesn't control for things like ethnicity. We will never have great teaching anywhere until we get rid of the teachers' unions.

bokonist2• 17 years ago

Journal publishing and citations are heavily based on social networks and the intricacies of the modern grant system. I really wouldn't trust citations to be a good indicator of research or advancement. A better thing to look at would be the flow of real world improvements that come out of a universities research. Unfortunately, there is no systematic measurement of that flow.

jseliger2• 17 years ago

"Research is not the same as learning, but its probably as good a proxy as we've got."

I'm a grad student in English Lit at the University of Arizona, and I'm not so sure: many of my freshmen talk about what it's like being in 500-person classes, their interactions with GATs who don't speak English, and so on, which appear to be common at big R1 schools.

It seems to me that the major thing the U.S. has going for it is competition between universities to a large extent; after (and sometimes during) high school, one has a wide array of choices, ranging from vocational schools to community colleges to liberal arts schools to R2 / R1 universities. But I'm not sure the latter are great for undergrads, though they're amazing for grad students.

The better question is whether the US will eventually implement real competition in the primary and secondary arenas, so as to avoid problems like this: http://www.newyorker.com/reporting/2009/08/31/090831fa_fact_... .

bokonist2• 17 years ago

As the next figure shows, no variable from 1900 better explains success in 2000 than investment in education.

How many other variables did Glasser analyze? And more importantly, how many variables from 1900 can we even quantify? Education is closely correlated with a number of other variables - quality of governance, IQ, culture, religion, level of development, etc. But there is no good way to quantify those variables for 1900 Argentina. Education may correlate well with growth, simply because its an excellent proxy for governance/culture/level of development.

diego3• 17 years ago

More importantly Argentina's educational level is very good and has been for a long time. Argentina has five Nobel prize winners (three for science) and Brazil, for example, has none. The literacy rate in Argentina is 99% and has been for a long time, and so on. Picking 1900 as a random point to correlate with GDP in 2000 is arbitrary and meaningless.

It seems like the author picked an arbitrary variable to make a point without enough subject knowledge or citations to back it up. Just visiting Argentina would make it glaringly obvious that the education hypothesis doesn't explain anything.

michaelkeenan2• 17 years ago

>Picking 1900 as a random point to correlate with GDP in 2000 is arbitrary and meaningless. It seems like the author picked an arbitrary variable to make a point without enough subject knowledge or citations to back it up.

I think it's unfair to focus on the lack of details in Glaeser's blog post, when it links to his 52-page paper[1] (which the post is a quick summary of). In the paper, he writes: "the Buenos Aires data suggests that less than one-half of the population could both read and write in 1869. By 1895, the next available data point, the literacy rate had shot up to 72 percent, which still meant that a substantial portion of the population was unable to either read or write. It isn’t until 1939 that more than 90 percent of the population in Buenos Aires is literate."

It appears that he is focused more on the historical conditions of Argentina's education than on present-day conditions.

[1]http://www.economics.harvard.edu/faculty/glaeser/files/Glaes...

kiddo• 17 years ago

There's a good book that covers this exact topic in much more depth. It's called "False Economy: A Surprising Economic History of the Word" by Alan Beattie. If I remember correctly, he focuses on how Argentinian land was owned by wealthy elites, satisfied with their wealth. In the US, small parcels of land were handed out to poorer individuals. Thus, the US held a greater attraction for immigrants. In the US immigrants also migrated inland quickly, leaving room in the cities for more immigrants to arrive.

Some of the book is available online through google books.

mediaman2• 17 years ago

Along the lines of this thesis, Hernando de Soto wrote The Mystery of Capital which outlines this policy of establishing property rights among the lower and middle classes rather than just the rich as a necessary policy to stimulate growth, as property rights enable the holders to make bigger investments in capital.

He argues that one reason South Korea did so well after the war was that the US adopted enlightened economic policies with regards to property rights.

brc• 17 years ago

I really need to write a script that logs on and comments 'correlation != causation'.

Are Argentines poor because they are poorly educated, or are they poorly educated because they are poor?

demallien• 17 years ago

Ummmm, doesn't the article implicitly address that? If your country is well educated, wealth increases. It's change in wealth that is correlated with education, not wealth itself. Or to put it another way, I have trouble imagining how wealth in 2008 can affect education levels in 1900, and I can't really think of a third variable to arbitrate between the two either, seeing as they are separated in time...

What happened to Argentina?

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