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Crying
for Argentina
The Argentinean “crisis.”
By
NR Editors
From “The Week,” January 28, 2002,
issue, of National Review
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 nce
upon a time, Argentina had an economy comparable to those of Europe
and America. Decades of Peronism (the Argentine version of protectionist
statism) have earned the country its unique designation as a "formerly
developed country." Argentina took baby steps away from Peronism
in the 1990s, and also allied itself with America. But the country's
economic meltdown — which has so far generated violent riots,
threats of government default, and five presidents in two weeks —
is now being blamed on these very steps, and on America. A return
to the bad old days is expected. Here at home, Argentina's travails
are being attributed to its 1991 decision to tie the peso to the dollar.
In fact, that arrangement succeeded in ending hyperinflation. It was
overspending that bankrupted the government. The International Monetary
Fund persuaded it to raise taxes to cover the cost. But higher taxes
merely hurt an economy already in recession. The government's commitment
to the dollar peg, meanwhile, started to wane. Capital flight predictably
ensued. Now the peg has been completely abandoned, and devaluation
is destroying the worth of people's savings. Neither Argentineans
nor Americans are drawing the right lessons. Over the next few years,
the former may learn them the hard way. |
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