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The development of argentina through the years

Only as recently as the turn of the 20th century, Argentina, along with several European and North American economies, was part of an elite club of prosperous countries — a club that, following the rapid rise of China and other emerging market economies, has grown in size in the decades since. For the most part, however, this was to be expected: European nations comprise a small corner of the earth, and as larger nations turn their subsistence farmers into industrial workers and then service sector employeesovertaking the old powers of Europe is inevitable.

It is less of a fall and more of an expected correction and relative decline. Argentina, however, really has fallen: This rating is still better than that of the majority of countries today, but its relative position is a far cry from scarcely 100 years ago, when its wages rivalled those of the UK.

In terms of prosperity, the nation has failed to maintain its position among the European and North American economies it once rivalled. A the development of argentina through the years on the rocks Behind this rise and fall has primarily been poor economic policy: Argentina has recently elected a new president, however: Since its fall from grace, Argentina has seen persistent poor policy and economic management from its leaders, creating a continually rising and falling economic pendulum see Fig.

As such, the new leader has a formidable task ahead of him. This increase, and the resulting rebound in growth, was unleashed by the previous administration in the run-up to election in the hope of buying the support of the electorate, but was ultimately unsustainable.

As such, projected GDP growth for Argentina in 2016 is 0. Net exports, as noted by the report, have been falling, while private consumption is weak.

Argentina has also been seeing soaring inflation, reaching over 15 percent in the first half of 2015 and around 14 percent in later months. This figure currently stands at around 20 percent. Imported difficulties Of course, some of the problems being faced by the Argentinian economy are cyclical: As the World Bank noted in its report: This has made Argentina something of a pariah on international bond markets, from which it is effectively barred.

  • Real interest rates remained highly negative for long periods through the late 1970s, which partly explains the low saving and the financial disintermediation;
  • Similarly, the liberal trade policy made a noteworthy contribution to early 20th-century growth.

On top of the world This reputation is in stark contrast to how the Argentinian economy was performing and perceived in the past. Writing in 1905, economics observer Percy F Martin heaped praise upon the future of Argentina in his essay Through five republics of South America: This cosmopolitan population was made up of waves of European immigrants.

In the late 19th century, in the lead-up to the outbreak of the First World War, Argentinian GDP surged at an annual growth rate of 6 percent.

A history of economic trouble in Argentina

Although the world has since seen growth rates much higher than this, at the time it was the fastest rate of growth recorded anywhere on the planet. This impressive growth rate allowed the country to rank among the 10 wealthiest nations on earth at the time, ahead of France, Italy and even Germany.

According to The Economist: After a long decade of relative decline, while much of the rest of the world excelled, Argentinians ended the 20th century with an income that was less than fifty percent of that of the Italians and Japanese. The period before World War One was an era of unprecedented globalisation and free trade, of which the Argentinians took full advantage, most notably through the export of beef.

Argentina profile - Timeline

When the era of free trade and economic liberalism fell victim to war and depression, Argentina began its long decline. For a nation so reliant upon exports, the tariffs and blockades of war were a disaster.

  1. Moreover, a larger volume of exports has led to significant increases in economies of scale. The Asian countries also had a greater degree of political stability at the time, boasting secure property rights — something that Argentina was, and still is, sorely lacking.
  2. As such, projected GDP growth for Argentina in 2016 is 0. These factors and the improvement of the population's educational level also undoubtedly explain the effective acquisition of foreign technological progress.
  3. For the most part, however, this was to be expected.

They also underlined a fundamental problem with the Argentinian economy: This meant that it was hit especially hard by the external shock of the new, war-torn era. This was not unique to Argentina — the period of 1914 to 1945 was a catastrophe for most economies around the world.

However, as much of the rest of the world subsequently went through an era of economic reconstruction, Argentina was for the most part left by the wayside. South Korea and Taiwan both favoured protectionism in order to foster domestic industries in the 20th century, with the intent of using the method to build up industries to compete on the world market — which they did, very successfully.

However, the protectionist policies of the two East Asian tigers and that of Argentina were very different.

  • On top of the world This reputation is in stark contrast to how the Argentinian economy was performing and perceived in the past;
  • To conclude, Argentina's economy by the latter half of the 1990s had been so revitalised that it echoed the promise it had inspired at the beginning of the century;
  • They also underlined a fundamental problem with the Argentinian economy;
  • At the same time, the export sector's weaknesses contributed to macroeconomic instability and inflation.

The present fortune of each country speaks for itself. The Asian countries also had a greater degree of political stability at the time, boasting secure property rights — something that Argentina was, and still is, sorely lacking. Argentina attempted to liberalise in the 1970s, but without any industry able to meaningfully compare with international competitors, this only served to precipitate another decline.

Peronism had allowed some industries to grow, but they were massively inefficient, shielded from the world market. Manufacturing had seen growth in the period of protectionism, but now started a long period of decline. Ultimately, turning in from the world had merely created inefficient industries, rather than providing a protected space in which industries could grow. Between the 1970s and 1990, Argentinians experienced a real per capita income drop of over 20 percent.

The long road ahead After a century of decline, the Argentinian economy approached the 21st century with a brewing financial crisis, with poor economic policy once again taking a toll on the fortunes of Argentinians.

Following a huge build-up of public debt and a period of high inflation in the 1980s, in the following decade the Argentinian Government decided to peg their currency to the US dollar. This was intended to reduce inflation and allow imports to become cheaper through currency appreciation.

While an appreciation of the Argentinian peso was indeed needed, pegging it to the US dollar meant that it overshot the mark.

  • This recognition, the magnitude of the crisis and two traumatic hyperinflationist episodes in 1989 and 1990 contributed to the emergence of a political and social consensus on the reforms needed;
  • In addition, state participation in the economy was then minor, public finance was strictly managed and the tax structure fairly satisfactory.

Along with longer-term issues such as poor tax collection and corruption, the recession resulted in a rise in state spending and a diminished revenue base. The response was a round of austerity cuts at the behest of the IMF, yet this only further deepened the Argentine recession. By 2001, Argentina had defaulted on its debts and did away with its currency peg: As capital fled the country, consumer spending collapsed and savings were wiped out.

The economy, however, was able to start to rebound after the devaluation, with Argentinian exports once again picking up see Fig. Furthermore, the onset of a boom in commodity demand in the 2000s also arose, largely fuelled by Chinese and emerging market demand. However, this once again caused Argentina to become reliant upon exports and vulnerable to external shocks — something that has just recently happened again with the global collapse of commodity prices.

It would be churlish to expect the new president to be able to completely rectify this century of economic decline: However, Macri can set about addressing certain problems with the economy, particularly with regards to cleaning up the mess left by his immediate predecessor. This will be a tough task, as exports will undoubtedly be hit by such policies and ordinary Argentinians will feel the pinch. Yet it is hoped that the new regime will begin to restore some normalcy to the economy and reinstate confidence in it for businesses.

The new fiscal and monetary policies of Macri, after countless years of economic mismanagement, should lay the foundations for a much-needed reversal of fortunes for Argentina. However, none of this will see Argentina return to its former economic glory anytime soon: Argentina must become neither dependent on nor cut off from the world economy, but find a middle ground that allows it to take advantage of world trade, while being able to deal with any external shocks that may arise.

Only then can Argentina hope to regain — and sustain — the economic prosperity that it lost a century ago.