Introduction

If there is one aspect of the difficult years that characterized the period from 1974 to 1989, it was that Argentina experienced negative per capita growth for the first time in history. The societal impact of this negative growth was easy to understand, considering that the population had suffered ever more extreme and terrifying political experiences. It is true that during these years, the golden age of growth and the stability of the dollar standard in Western countries had ended, as discussed in the introduction of the present book; however, this was not a matter of a decline in per capita GDP but rather a deceleration. This difference caused the growth gap in Argentina begun during the postwar period to broaden, and the country's position on the international stage began to slip. The case of other Latin American countries, such as Mexico and Brazil, was different from that of Argentina. Even though those countries experienced a substantial deceleration during the 1980s, during the 1970s they maintained a respectable rhythm of growth. (Between 1973 and 1980, while per capita GDP in Argentina grew at a rate of 0.48%, in Brazil it was 4.26% and in Mexico 3.8%.)

The events of Argentina's past provide the basis of a plausible explanation for these bleak circumstances. It is important to consider these events in order to go beyond a simplistic treatment of the situation; assigning blame is rather easy because nearly everyone was guilty to some degree.

The Great War

The years between World War I and the 1930 crisis may be characterized as a period of great transitions. As a response to the extraordinary economic challenges that arose during the crisis, institutions would be forever altered, with policies that would be further elaborated during World War II. The Great War represented a watershed between the world that was open to trade, and to the movements of capital and people, and the world of the closed economies that followed. Yet it was the 1930 crisis that definitively ended la Belle Epoque and the “Roaring Twenties” and led to the creation of this different world.

World War I had also left considerable intellectual changes in its wake. The notion of total war led to government intervention in economic affairs. But this intervention was also spurred on by workers and entrepreneurs who demanded it, as they began to realize that they could improve or imperil their respective positions (their relative prices) by doing so. To that point in time, prices had been negotiated on the market.

When the government financed projects by issuing debt or currency, the move had an effect on workers' real earnings and savings, as well as on capital and financial markets. Government intervention in trade and financial and exchange markets, in housing rents, and so on, created a new framework; the government made decisions that had previously been dealt with between the interested parties.

The 1930 Crisis

There is no real consensus regarding when and where the financial crisis began. For some, it is the moment when the New York Stock Exchange crashed, that infamous Black Thursday in October 1929. Others point to the bankruptcy of Credit Anstaldt in Austria, which had immediate repercussions in Germany and the Central European countries, where there was an enormous loss of reserves. The Anstaldt bankruptcy would ultimately exert pressure on the British pound, which in turn would lead England to abandon the gold standard in October 1931. According to Sauvy, the crisis began in France, yet Kindleberger asserts that the origins of the crisis can be found in the agricultural depression of the mid-1920s. In the United States, the stock market crash was followed by a banking crisis in 1930 and bank closures, which froze deposits. These closures were repeated in 1931.

From the mid-1920s, there were serious imbalances in the international goods and capital markets. Protectionist measures not only led to the accumulation of primary product inventories, which created downward pressure on prices, but, in the case of the United States, with passage of the Smoot-Hawley Law, decreased imports from the rest of the world. In response to this, demand for U.S. exports would have logically dropped, but this situation was averted initially because imports from the United States were financed with loans, which in turn increased the world's indebtedness to the United States. This was particularly the case for Germany and Latin America.

There is an undeniable feeling of frustration in reaching the end of this story. It includes periods of economic boom and others of crisis and recovery. But even with the latter, there was never sustained growth during the second half of the twentieth century. There were relapses, new breaks, and finally a long decline. The country grew very little and lagged behind other more developed countries.

Nevertheless, the moments of growth impetus were repeated. Although among the policies implemented there were countless errors and follies, during nearly all of the growth periods, it seemed that the country had overcome the difficulties, whether external or inherited, and the expansion promised to continue. But frustration was invariably the result.

There was no transformation as ambitious as what Perón tried, benefiting from a growth trend that had begun in the mid-thirties and the considerable impetus that exports received in the immediate postwar period. But his abuse of the instrument of appropriation of savings of the public, and of discretionality, was also unequaled. His legacy was one of grave imbalances and inflation. To this was added a complex regulatory system, an insular mentality, and income distribution conflicts. After the fall of Perón several subsequent administrations tried to reverse the greatest imbalances that his administration had left behind, seeking to somewhat deregulate the economy (with a less pronounced role for the state), but the efforts had little success. The assault on the state had become the mechanism by which privatization of public goods was pursued.

Introduction

There is very little about which all Argentines agree, but there is a general consensus that Peronism brought a fundamental change in the life of the country. Although the 1914 war marked the end of the Belle Epoque, certain institutions, and much of the culture of that period, endured until World War II, albeit in a somewhat altered form. Nothing would be the same after Colonel Perón stood in front of the Town Hall (Consejo Deliberante) building, now converted into the secretary of labor, and harangued the workers. Who would have thought that a military government would promote a movement that supported political participation of the workers and the defense of their rights? Given that the government had been imposed by a military clique called the Group of United Officials (the GOU) and had Nazi sympathies and a desire to repeat Franco's Spanish experiment (even, like Franco, appealing to the notion of a glorious Hispanic past), this brand of populism came as a surprise.

By no means did Perón have a vision from the beginning for the movement that kept him in power, and that lasted the entire twentieth century. Initially, although he was not the leader of the revolutionary Junta, he managed to achieve key positions in the June 4 coup d'état military hierarchy.

This book discusses the evolution of the Argentine economy in the twentieth century. It covers a century that actually begins a few years earlier, in the decade of the 1880s, with the foundation and expansion of modern Argentina, and ends in 1989. This analysis does not include the last decade of the twentieth century because the 1989–1990 hyperinflationary period marks the end of an era and the beginning of a new one that is beyond the scope of this book. The convertibility system of the 1990s ushered in new problems, the recession starting in 1998 and the crisis of 2001–2002 afterward, following which was the recent and significant recovery (2003–2006). These more recent developments are part of an ongoing process that will only be understood as patterns emerge.

In the span of that century Argentina went through numerous and contradictory experiences. At its beginning it saw a rapid expansion followed by a deceleration after World War I. In the second half of the century there was only one decade of growth, the 1960s, and ever since then, it has suffered a clear decline. Until Word War I it grew at a rate that was greater than that of some more industrialized countries, converging to those levels of per capita income. During the second half of the century, however, Argentina fell behind, and the difference between it and more developed countries became evident.

The 1880s were characterized by intense economic activity. The bustling Port of Buenos Aires epitomizes this decade, with the arrival of ships packed with goods and immigrants from a panoply of nations. These ships left Buenos Aires filled with raw wool, hides, and later, grains. Argentine goods poured into European ports, but European goods returning to Argentina occupied less space. So the unused cargo space on these ships was filled with human cargo. This became an inexpensive way for European immigrants to reach Argentina, where the rapidly growing economy held the promise of work, either in agriculture or in urban centers.

Europeans became a significant part of Argentina's population. Although a majority of the new immigrants identified themselves as farmers, during the 1880s the railroad had not yet reached the interior, so the European immigrants remained in Buenos Aires and in other costal cities where the dizzying pace of investment created an insatiable need for labor. In the Argentine Pampas, without navigable rivers – except the Paraná – the development of agriculture would have to wait for the construction of the railroad, the cost of which was well beyond Argentina's saving capacity. Thus, when it took on the project, the government financed railroad construction by accruing external debt. When private investment was allowed to enter the picture, it was through concessions to foreign companies that were guaranteed profits.

Introduction

The title of this chapter is meant to highlight the turbulent political circumstances that surrounded economic activity during the eighteen years that began with the fall of Perón and ended with his return to power in 1973. The serious conflicts that the Argentines experienced happened under an international framework characterized by the Cold War, which, although it was a cohesive factor for Western Europe – under the Pax Americana – had negative effects on Latin America. Added to the chronic instability of the region were military interventions that were supposedly intended to prevent civil governments from falling under communist influence, perceived as an imminent threat once Cuba became part of the Soviet bloc.

The division among Argentines did not begin in 1955, however. There were already deep societal schisms beginning during World War II, more specifically when a military junta from the GOU (Grupo de Oficiales Unidos), sympathetic to the Axis powers, took over the government in 1943. When the Allied powers experienced military success, a broad swath of society intensified its opposition to the government hoping that with victory against the Nazis, the strong Allied pressure would help return Argentina to democracy. However, the 1943 military junta, which was the closest thing to an authoritarian government that the country had known, was not overthrown. There were two essential ingredients of the military government's continuity: First, the United States preferred solid, anticommunist governments, as in the case of Spain.