In response to Eugenio Diaz-Bonilla’s previous post:
Since I’m not sure anyone but the two of us is still reading, I’ll keep my remarks as brief as I can. But first of all (and most importantly): I agree entirely that the importance of this analysis is in informing the debate about what Argentina should be doing now and in the future to arrest its relative decline. Yet most of what we have been arguing about belongs to a different era, one of an agrarian society with a dominant landowner class. That world has long gone – although, as I previously noted, Cristina Fernandez still demonises the landowners when it is politically useful.
Whether or not you think the 19th century Argentine elite made bad choices – and in fact it is the 1930s and 1940s when I think the truly bad decisions started – the country is not bound by those events now. Argentina’s main problems over the past couple of decades include fiscal delinquency, political corruption and choking regulation (it ranks 118th on the World Bank’s Doing Business measure, below Nicaragua, Swaziland and Uganda). Those are fixable if the electorate votes for the right people and they then have the courage to implement the right policies. Mistakes that were or were not made a century ago do not have to bind their hands. If Argentina really is trying to find its way to a diversified economy, its agrarian past isn’t stopping it. After a while, path dependence and hysteresis become excuses, not reasons.
Anyway, on the specific points:
– I didn’t say Argentina and the US were identical; I said they were similar. While admittedly less endowed with natural resources, the big surpluses generated by Argentine agriculture towards the end of the nineteenth century should have helped it relax the resource constraint by importing them. Instead, it imported too many consumer goods. I fail to see how Argentina’s agrarian structure prevented it industrialising, particularly since its low labour utilisation meant it wasn’t competing significantly for workers. The fact that the Argentine industrial economy was hedged around with restrictions, monopolies and regulations had a lot more to do with it. And as I said before, the resource argument doesn’t explain the success of Japan, which had coal early on in its industrialisation but soon used it up and largely had to rely on imported inputs.
– On the comparison with the UK: “The structure of incentives is different if you produce food for the internal market as the UK landowners did, and were forced to reconvert because of the pressure of other internal forces”. Nice try, but no. The British nobility started investing significantly in proto-industrial enterprises as early as the 16th century (mining of coal, lead and salt), well before industrialisation had put pressure on their agricultural interests, and continued doing so throughout the Industrial Revolution – despite having no model to follow.
– “The narrative in the article and his two answers, with anthropomorphic constructions such as “Argentina did this” or the “US did that,” evoke the image of all-powerful planners”. Maybe to some readers, but I think it is fairly clear from the context that I am talking about decisions taken collectively through the political process – though in Argentina during the late 19th and early 20th centuries that generally meant a fairly small elite.
– The long section on population I think is making far too much out of quite a simple argument: I was merely rebutting the earlier point that Argentina was physically too small to be a superpower.
– I’ve explained before why Australia is a misleading comparator.
In conclusion, we will indeed have to agree to disagree. Eugenio regards my book as not serious analysis: I regard his critique as the latest in a long, long line of apologias for Argentina which ascribes to bad luck, natural resources or the whims of a capricious world that which should substantially be attributed to its misgovernance.
Countries can effect remarkable transformations in their economic management: in Argentina’s own neighbourhood, Brazil has done so over the past decade and Chile, via a more circuitous route with some missteps, has done so over a longer period. There is no intrinsic reason that Argentina cannot do the same. As I have reported in the FT, several very senior policymakers have told me or my colleagues that they regret inviting Argentina into the Group of 20 because its contributions to the debate do not suggest it is a serious participant in global economic governance. (Less than a decade ago it also defaulted to the World Bank, an action that puts it in the company of Sudan and Zimbabwe.) For a country that used to be one of the ten or so biggest economies on earth, that is an indictment that cannot be explained away by natural endowments or misfortune.