Argentina’s Economic Decline: From World’s 3rd Highest GDP to Poverty
How did Argentina, once more prosperous than France and Italy, become a country where more than half of its population lives in poverty? Let’s quickly examine this dramatic rise and fall.
Divine Blessing and Era of Prosperity (Late 19th – Early 20th Century)
Argentina enjoyed enormous wealth through agricultural and livestock exports thanks to its fertile Pampas. It ranked 3rd globally in GDP per capita in 1896. World War I brought unexpected prosperity to Argentina as it exported food and supplies to Europe, and until the 1920s, it maintained a higher GDP per capita than France and Italy.
Note: The Pampas is a vast temperate grassland region spread across South America, particularly in Argentina. The name comes from indigenous language meaning “plains,” and true to its name, it features endless flat terrain.
Shadow of the Great Depression (1929)
However, an economy centered on primary industries was vulnerable to external shocks. When the Great Depression hit in 1929, countries imposed tariffs on imports, blocking Argentina’s agricultural exports and rapidly contracting its economy. Citizens demanded quick solutions from the government, but this was a global crisis that couldn’t be resolved overnight.
The Quicksand of Populism: The Rise of Juan Perón (1940s)
The economic crisis created political turmoil, and despite two military coups, the situation didn’t improve. It was then that Juan Perón emerged as a savior. In these chaotic times, people yearned for new politics and policies, leading to Perón’s election as president in 1946.
Perón implemented welfare policies like wage increases for workers, paid vacations, sick leave, and introduced protective tariffs to safeguard domestic industries. The economy appeared to stabilize initially, but when Argentina’s agricultural products lost ground in European markets due to pressure from the United States, crisis returned. Eventually, a military coup forced Perón into exile in 1955.
Persistent Military Coups and Deepening Welfare Populism (1960s-1970s)
Subsequent military regimes failed to revive the economy, and citizens, nostalgic for Perón’s sweet welfare policies, demanded his return. Perón returned to Argentina after 20 years and was elected president again in 1974, but died nine months later. His third wife and Vice President, Isabel Perón, succeeded him, but economic and political chaos worsened. Another military coup occurred in 1976.
Failure of Neoliberalism and the Trap of Inflation (1980s-1990s)
The new military regime discontinued welfare policies and pushed neoliberal policies like privatization and budget cuts, but without implementing proper austerity measures. This only increased foreign debt and triggered massive inflation. Having lost public support, the military stepped down, and President Alfonsín was elected, but his solution of printing money to solve fiscal deficits led to hyperinflation.
President Menem, elected in 1989, successfully controlled inflation through privatization and fiscal austerity, but Argentina’s economy faced another crisis following the 1997 Asian financial crisis. Citizens once again demanded a return to past welfare policies through protests.
Commodity Boom and Revival of Populism (2000s)
Eventually, in 2003, Néstor Kirchner, who advocated for Perón’s welfare policies, was elected president. During his term, Argentina’s economy recorded high growth rates thanks to global commodity price increases. Based on this success, his wife Cristina was elected as the next president.
However, the commodity boom was temporary, and Cristina’s government worsened national finances by doubling the number of civil servants and expanding pension recipients, implementing unsustainable welfare policies.
Failed Reforms and Deepening Economic Crisis (2010s)
Tired of populism, citizens elected business tycoon Mauricio Macri as president, expecting austerity policies. However, reforms didn’t materialize due to public resistance. Instead, foreign capital fled and currency values plummeted, further deteriorating economic conditions. Argentina ultimately had to request a bailout from the IMF.
What is the IMF (International Monetary Fund)?
The IMF is an international financial institution established to promote global economic stability and international monetary cooperation. It aims to help member countries overcome economic difficulties and achieve sustainable growth.
A bailout refers to emergency funding provided by the International Monetary Fund (IMF) to countries facing economic crises. This measure is taken to help the country overcome short-term liquidity problems and prevent more serious economic collapse.
Even after Alberto Fernández was elected president in 2019, the situation didn’t improve, with cumulative inflation exceeding 200% and the poverty rate surpassing 40%, facing severe economic hardship.
Once Again at a Crossroads of Reform (Present)
Argentina has now welcomed a new president, Javier Milei. Public opinion is sharply divided over his radical economic reform policies. Whether Argentina can escape from the sweet poison of past populism and walk the path of true economic recovery depends on the patience and support of its citizens. What does the future hold for Argentina, once boasting the world’s 3rd highest GDP?