Back to the Future, Courtesy of Argentina

President Nestor Kirchner of Argentina is often portrayed as an anti-capitalist radical for proposing a "haircut" of over 90% on the value of Argentina's defaulted external debt. But, whatever his motives, the anxiety that led up to Argentina's last minute deal with the IMF to repay $3.1 billion owed the global lender may serve to help to rescue what capitalism is really about: the appropriate judgment of risk.

Economic development involves financial flows and the buildup of debt. In a domestic setting, bankruptcy and default are common. Indeed, one characteristic sign of economic vitality is the frequency of bankruptcy, for business failures indicate a willingness to gamble and take risks on innovation.

Today, there is a higher level of bankruptcy in the United States than in the European Union, and it is easier for bankrupt Americans to embark on new ventures. As a result, Americans are more prepared to be innovative.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/j2WOP8V;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.