In the debate over what went wrong with Argentina, too much analysis has focused on the country's exchange rate policy or the mistakes the IMF may have made; too little attention has been paid to the social and political factors that contributed to the country's demise.

Argentina is unique among the world's emerging economies because its problem is not underdevelopment, but arrested development. Seventy years ago, it was one of the world's richest countries. Over time, however, political instability and misguided economic policies have left it lagging behind its former peers.

Despite that, until recently, literacy levels were high by Latin American standards and there was a broad middle class. The social welfare state never reached par with its European counterpart, but life was reasonably good on the pampas.

Democracy was restored in 1983, but decades of economic mismanagement began catching up to the country with a vengeance. The troubles were compounded by the failure of the first post-dictatorship government, headed by Raul Alfonsin, to adapt to the emerging new global economy.

Shortly after taking office, the next President, Carlos Menem, reversed half a century of economic and foreign policy. The country was opened to foreign trade and investment and state-owned companies were privatized. To whip hyperinflation, the peso was pegged one-to-one with the dollar, and a once standoffish relationship with the United States became, in the words of the foreign minister at the time, "carnal."

While the money flowed and the economy boomed with a stable currency, everybody went along for the ride. But distaste for Menem's economic "model" and his autocratic, corruption-tainted ways ran deep.

When a new center-left government took office in the midst of a recession in 1999, there was hope it would correct the excesses of the Menem years. There was little effort, however, to engage in the needed institution building or to weed out corruption. As the recession deepened and unemployment grew, blame fell increasingly on the "model," though questioning the wisdom of its central feature, the dollar peg, was taboo. Nor could anyone articulate an alternative that didn't sound like a return to the statist, protectionist policies of the past.

The public's reaction was thus contradictory. Despite the growing disenchantment with the model, people were still more afraid of what would replace it. The increasingly unpopular President De la Rua's stuck to his austerity program, while Argentines stopped spending and investing. Then they lost confidence in the banking system and rushed to take their money out. The end result was De la Rua's forced resignation and today's economic chaos.

Many developing countries have grown disenchanted with the free market model in recent years. But it is difficult to explain why Argentina, a country that a generation ago had more in common with Australia than Peru, has been unable to make the transition to modernity.

One factor is the still prevailing myth that Argentina is a rich country, or would be, if it weren't for a cabal of corrupt politicians, greedy local businessmen, and international financiers who have robbed the place blind. There is certainly some truth in that, but what many Argentines fail to realize is that a country's wealth is no longer measured by its endowment of natural resources but by the strength of its institutions, the quality of its human resources, and its productivity.

Oblivious to this, all the major political forces in Argentina are still populist, more intent on figuring out how to distribute the country's fictitious wealth than on how to create it. Echoing the corporatist, nationalistic rhetoric of Juan Peron, his party's founder, the new President, Eduardo Duhalde has promised to implement a new "economic model" founded on an alliance between the government and the domestic manufacturers and agricultural producers.

That kind of nationalistic talk strikes a chord and sends a collective shiver down the Argentine spine. But the Argentines are as schizophrenic in their attitude toward nationalism as in their attitude to modernity in general - not for nothing does Argentina have, per capita, the world's highest number of psychoanalysts. Nationalism is widespread, but its roots are shallow. Anti-US sentiment is common, but the only currency people trust is the U.S. dollar. The Argentine's contempt for his own country is unsurpassed anywhere in the world. Indeed, thousands of Argentines reacted to the crisis by lining up at the embassies of North American and European countries in the hopes of obtaining a visa that would allow them to leave.

Another factor in Argentina's inability to reform can be traced back to the Dirty War of the last military dictatorship. Most of today's politicians, intellectuals, and other professionals over the age of 40 were the victims of that unequal conflict. As the economic model began taking shape a decade ago, they saw many of the same people who had sided with the military in the 1970s turn into some of the biggest beneficiaries of the new economy.

Had Argentina managed to get through the ideologically charged 60s and 70s relatively unscathed, the mostly educated opponents of the ``model'' would have probably mellowed with age. Like their counterparts in the north, they would still be socially committed, but mindful of their stock options, as they bored their children with stories of the "I was at Woodstock" variety. But the murderous events of the past have left scars that a brief, unsustainable lapse of prosperity was unable to make disappear. As a consequence, much of the political elites could never be won to back the impersonal market, which made no distinction between them and their old enemies.

The question now - one that few are willing to ask openly - is: will the downward economic spiral reopen the wounds of the past - and renew conflicts that are unbearable to even think about?