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America’s Argentina Risk

Argentina was one of the world’s richest economies in the first few decades of the twentieth century, but subsequently became a cautionary tale of how a wealthy country can lose its way. By peddling policies that bring about short-term highs at a huge long-run cost, US President Donald Trump risks taking America down a similar path.

ITHACA – There is a growing belief that the United States is heading for a recession, possibly before the 2020 presidential election. Current economic data and statistical trends indicate that many parts of the US economy are apparently under strain. It is not evident to me, however, that a recession is around the corner. In fact, the real danger for America is more serious, and is best described as the “Argentina risk.”

During the first few decades of the twentieth century, Argentina was one of the world’s fastest-growing economies. It also had talent flowing in, with more immigrants per capita than virtually any other country. As a result, Argentina was among the world’s ten richest countries, ahead of Germany and France.

That all changed in 1930, with a military coup led by Lieutenant General José Félix Uriburu. Over the next few years, amid rising right-wing hyper-nationalism, immigration stalled and tariff wars began. Between 1930 and 1933, the country almost doubled its average import tariff. What followed was not so much a recession as a slow-motion slowdown, the scars of which are visible even today. Argentina thus became a cautionary tale of how a wealthy country can lose its way.

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