Argentina’s Marked Decline: Government Failure vs Predatory Capitalism

One of the richest economies globally at the beginning of the 20th century was Argentina. Argentina was synonymous with success in Latin America due to its Gross Domestic Product (GDP) that competed with that of the united states. It had vast lands that were arable, booming industry and was liberal when it came to allowing foreigners into their borders which encouraged fast development through various means such as farming or working for industries established therein. However, after several years this same country underwent tremendous decline where she has changed from first-rate global economy nation into among others like hyperinflation-stricken nations characterized by high degree. Though some experts think predatory capitalism might have been responsible others say they prolonged experimenting with socialist oriented policies as these several triggers caused this sudden downfall but recent studies prove without doubt latter theory holds more water when analyzing Argentina’s case especially regarding failed economic policies in principle.

Prosperity of Argentina in The Early Years
At the dawn of the twentieth century Argentina stood out among other players on world economics scene. Argentina boasted immense natural deposits, vast tract of agricultural land which in turn lead to an upsurge in population largely attributed to immigration that saw its GDP per capita match that of US. By 1913, this country had been listed amongst world’s ten richest countries where Buenos Aires, the capital city was often compared to European cities such as Paris due to its high standards of living including culture and architecture.

Essentially, free market served as basis for its wealth during this period. For instance, Argentina was involved in international trade where they exported beef, wheat together with other crops to European countries and United States. There was massive foreign direct investment which came pouring in the form of railways, waterways development and set up industries here. On top of that government’s intervention at large in these spheres was minimal hence fostering growth of businesses at large.

All the same, this was not to be. In fact there have been numbers of political and economic changes over the last century which slowly eat into wealth in order to lead a country like Argentina towards stagnation then it declined especially due to socialist policies.

Turn To Socialism
The real shift started during the 194s with Juan Perón coming into power who remains a key figure among Argentina’s most powerful and controversial leaders ever since then. His government implemented several measures aimed at advancing populism as well as socialist-oriented activities including redistribution of wealth among populace while asserting control over all means production so that wealth could be shared equally between its citizens. At first, Perón’s policies enjoyed massive support from majority among them working class but eventually led to many economic problems.

Perón’s administration expanded government influence in almost every industry in the country. This resulted in the nationalization of transport means such as roads, where these were transferred from private hands into public ones thereby leading to establishments like banks, power plants as well as rails coming under state’s direct control. Their former competitive nature soon disappeared under state watch making them inefficient and bloated at the same time. Heavy handed regulation was also used by this administration on private enterprises thereby threatening innovation within these firms and discouraging overseas investments. Consequently, Argentina’s economy which had been very vibrant became more insular following protectionist measures enforced by government.

Under Perón’s economic model, another bad aspect was that when he stressed more about redistribution of wealth through unworthy social spending ways than actually creating money value. Government raised pay rates, was liberalized in giving pensions, and other social benefits were given but through debts and printing money to support such policies rather than using them on productive activities that could add value. This led to rise in prices, while budget deficit increased.

Despite his ouster from office, many of Perón’s policies continued to shape Argentina’s politics. The military and civilian administrations that came after him dwelt on authoritarianism as well as democracy but retained similar socialist leaning economic policies resulting into a vicious cycle of economic mismanagement, inflation and repetitive debt crises.

Implications of Socialist Policies
Argentina’s economy has suffered from decades of socialist-leaning policies which have caused significant harm. One of the most visible outcomes is chronic inflation. In the last few years Argentina has undergone several episodes of hyperinflation where prices have escalated making people’s savings worthless. This is in part due to reliance on printing money by the government for its social programs and covering fiscal deficits.

Secondly, nationalization of key industries has led to inefficiencies and corruption. The state-owned firms, often shielded from competition with poor management, have become a burden on the nation. In order to continue functioning, they require constant financial injections from the government which triggers more deficits at the budget lines. The environment of taxation and regulation within the private sector has also limited entrepreneurship and investment by individuals.

Moreover, Argentina’s social welfare programs have been unsustainable. The government’s generous pensions and social benefits have created a bloated welfare state that is impossible to finance without resorting to borrowing or inflationary policies. Consequently, the country has been on a debt cycle where it has failed to honor its obligations more than once in the past twenty or so years. Each time such event occurs; the ability of the nation to engage in productive economic growth through borrowing on the international market reduces.

The Misconception Market Capitalism
Some critics suggest that the decline of Argentina is due to predatory capitalism where foreign corporations and investors have plundered its natural resources leaving it in an economic mess. However, this is not correct. Argentina’s wealth was attained when it embraced international trade as well as investment before slumping with adoption of protectionist and socialist policies.

In a bid to stabilize its economy, Argentina has had several cases when foreign investments would come in handy. For instance during the 199s the country witnessed return into free market reforms under the leadership of President Carlos Menem who opened up economy privatized state owned enterprises thereby attracting foreign investors. These measures should be seen against the backdrop period of either slow economic growth or recession, after which the country’s populist policies returned in 200s under Kirchner administrations plunging it once more into economic crises.

Predatory capitalism is not the problem facing Argentina but rather long term outcomes left behind by socialist inclined policies which stifled growth through inefficiency leading to high levels of debt that are unsustainable due to hyperinflation levels.

Conclusion

Socialist leaning policies rather than predatory capitalism are responsible for Argentina’s significant decline in the last century. Argentina was once a highly affluent country in the world, however it has been debilitated by governmental involvement, insupportable social spending, and protective trade policies. In a bid to create a society where everyone was well off, the policymakers had no other alternative than to pursue these objectives though this has resulted into economic stagnation marked with inflation and poverty.
In order to revitalize itself, Argentina has to abandon failed socialist measures and go back to those that brought prosperity – including open international trade, investment as well as an efficient market economy based on competition. Only by doing this can it hope to restore its position as a leading world economic power.