Neo-liberalism's Argentine Failure

In the 1990s Argentina implemented perhaps 80% of the neoliberal economic policy agenda. It opened up its economy to world trade and international capital; it sought to guarantee low inflation and sound money. It strove to improve its legal system so that decisions would accord with general rules and foster confidence that contracts would be enforced--whether or not a bribe had been paid.

It failed. This is not to say that the 1990s, even with their aftermath leading into the terrible summer of 2002, were catastrophic. Life was clearly worse during the Dirty War of the 1970s, when an army with no honor threw women out of helicopters into the South Atlantic, and urban guerrillas shot people because... because... well, just because!

The 1980s were hardly better. Starting with a full-fledged debt crisis triggered by a massive rise in both US interest rates and the value of the American dollar, the decade ended with domestically-generated hyperinflation, causing Argentina to fall a decade further behind the world's leading economies.

In the 1990s, by contrast, Argentina's GDP per capita grow by 25% from trough to peak--only to lose this entire income gain over the past four years. Until late last winter, Argentina's problems seemed merely an unpleasant but temporary bump, in the same way that the 1994-1995 Mexican "tequila" crisis or the East Asian crises of 1997-1998 proved to be only temporary interruptions, not watersheds.