The Past is Now

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.