Crying for Argentina
The Argentinean “crisis.”

By NR Editors
From “The Week,” January 28, 2002, issue, of National Review

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.