Argentina: The Problem Is the State

A man waves an Argentine flag during a protest against a cost increase in public and utility services in Buenos Aires, January 10, 2019. (Marcos Brindicci/Reuters)
As long as Argentinians do not understand its key problems, they will not move forward.

Argentina did everything backwards. We were a developed, rich country that, after years of populism, has ended up underdeveloped.

The prosperous Argentina of the 19th century, one of the richest countries in the world, owed much of its early success to the ideas of Juan Bautista Alberdi, the political philosopher who was hugely influential in the drafting of the 1853 Constitution, a constitution based on the ideas underpinning the Constitution of the United States of America. We did well as a country when we bet on good ideas, when we bet on the rule of law and the free market, and when we bet on opening ourselves to the world.

With an economy based on the export of agricultural products — notably mutton, wool, beef, and cereals — Argentina, “the granary of the world,” rapidly became very rich, as a glance at some of Buenos Aires’s turn-of-the-century architecture shows. Much of this growth, and not only in the agricultural sector, was driven by foreign investment in the country. But the mid 1940s arrival into power of Juan Domingo Perón and his ideology, Peronism –which is usually simply described as populist but is better seen as a variant of fascism — effectively put an end to that. Peronism drove Argentina into poverty and became the basis of a political system which is still in place today.

To understand Perón it is necessary to remember that he was an admirer of Benito Mussolini, and, by extension, fascism. He spent time in Mussolini’s Italy experiencing Fascism firsthand and was fascinated by the figure of the “Duce,” in whom he saw an image of his own political future.

Once he returned to Argentina after his visit to Italy, Perón was put in charge of the Secretariat of Labor and Social Security. He used that position to promote the interests of the trade unions and cemented an alliance with the unions — including, importantly, the powerful Railway Workers union — that was to be critical both in the shaping of Peronism and its hold on power. Membership of the trade unions grew from just over half a million in 1945 to nearly two million in 1949.

Perón applied what he had learned in Europe, aiming to create a corporatist society in which the working class played a significant role but were expected, like all other classes, to follow his guidance. They were an essential source of support for him, and he was their representative — or so the story ran — but also their leader.

It proved to be an effective formula. Whether in power, out of power, in exile, in prison, or even dead, Perón became the dominant figure in Argentine politics, a position he has never relinquished.

Once Perón was in a position to do so, he put more emphasis on redistributing wealth than on creating it, most importantly by taking aim at the profits and wealth of the crucial agricultural export sector. Nationalization of the railways and other key enterprises was, unsurprisingly, a main part of this strategy. These policies played well, winning him immense popularity with the audience that he had targeted.,

Corporatism is about control: Peronization of the state, universities, and the media began. University professors who did not support him were fired, import restrictions increased, the Supreme Court lost its autonomy, and a number of opposition politicians were imprisoned.

In 1949, a new Constitution was adopted, and Perón’s social doctrine, Justicialism (Justicialismo — a reference to “social justice”), became the ideological and institutional basis of Argentina and gave Perón’s political party– the Justicialist Party (Partido Justicialista) — its name.

Public expenditure exploded: In 1946 it amounted to 25 percent of GDP; in 1948, 42 percent. By 1954, the number of public employees had reached 725,000, nearly double the average of 370,000 between 1940 and 1944. Politics and policy went hand in hand: State employees were obliged to join the Justicialists.

Justicialist economics also came to be characterized by a pursuit of something resembling autarky. Harsh import controls were introduced and much of the foreign capital invested in the country was either expropriated or fled. New investment from abroad would be hard to find, even on those occasions when it was wanted.

It almost seems superfluous to add that inflation took off. In 1946, it stood at a little under 19 percent. By 1951, it was running at over 50 percent.

The country was Peronized, and with that came the institutionalization of corruption, which had been a problem before, but never on the scale that was now seen. An expanded state provides rich pickings for the corrupt. Corruption was, in one way or another, built into the system and has never gone away.

Peronism is an ideology with little room for any concept of freedom. In 1947, Perón said he would “would raise gallows throughout the country to hang the opposition.” Under Perón, the economy was rigidly controlled by the State, imposing total tutelage over foreign trade and the exchange of foreign currency. On the political level, the regime boxed in the opposition, eliminated freedom of the press, imprisoned countless political prisoners, and modified the Constitution in order to secure its reelection in 1952.

Since then, Argentina has been governed, except for a few years, by Peronism in one form or another. And when Peronists have not been in power, they have effectively rendered the country ungovernable. Over the years, Peronism has evolved. There are different strands within it, some more benign than others, but there is nothing that is benign about what may now be its dominant variant: Kirchnerism.

Kirchnerism takes its name from Néstor Kirchner, who became president after a complex series of maneuvers in 2003. By that time, the country was already showing signs of recovery after a profound economic shock, and that recovery continued after he took office, with a considerable amount of help from the global economy. As Argentina’s exports grew strongly, Kirchner squandered the windfall: Public expenditure grew from 29.4 percent of GDP in 2003, to 43.2 percent in 2009 and 45.5 percent in 2011. Nothing had been learned from the disasters of the past.

Kirchner was succeeded as president by his wife Cristina in 2007, who, if anything, doubled down on her husband’s mistakes, particularly after his death in 2010. Kirchnerism, followed a familiar pattern.

Clientelism, a massive increase in corruption (some allegedly involving Kirchner and her circle), boosting the public payroll (between 2003 and 2015, the number of public employees grew by 64 percent, from approximately 2,200,000 in 2003 to 3,600,000 in 2015) for electoral purposes, fiscal and monetary irresponsibility, and heavy-handed regulation, which was bad enough in itself but was also used against political opponents.

For all the disasters that Peronism has left in its wake, there are no signs that it will be disappearing from the Argentine political system anytime soon. For Peronism, power is a business that has enriched leaders and trade unionists for more than 70 years. It’s too good a business to give up, at least for as long as so many Argentines are, for one reason or another, still prepared to support it — and they are. In 2019, they voted against the reelection of Mauricio Macri, who had tried to take the country down a different route, and opted instead for the election of Alberto Fernández and his vice president, none other than, Cristina Fernández de Kirchner. This was despite, in the latter’s case, charges of massive corruption and a preliminary judicial finding that a memorandum of understanding that Kirchner had signed with Iran had in effect been an agreement to cover up Iranian involvement in a 1994 terrorist bombing. The deal was struck, allegedly, in exchange for access to oil and, supposedly, other benefits. As vice president, she will be immune from prosecution.

Macri failed to bring about the structural and economic changes that Argentina needed. To be fair, he had brought more transparency to government and had taken up the fight against corruption, as well as a broader effort to reinstate the rule of law. But his administration did not succeed in making much of a dent in the immense state apparatus that exists in Argentina, a country populated by some 45 million people, where nearly half the population receives money from the state in one way or another — whether through subsidies, as pensioners, or through working in the public sector. Only 8 million citizens work in the private sector, paying no small part of the cost of the other 21 million. It’s no surprise that tax rates are as high as they are.

As long as we Argentinians do not understand that its key problems — an intrusive, overspending, and swollen government, a market-distorting and unaffordable subsidy regime, and a closed and protectionist economy — are all the products of a populist legacy that it appears unable to shake off, we will not move forward. To do that, we will have to return ironically to the past and the path set by Juan Bautista Alberdi.

Antonella Marty is Associate Director at the Atlas Network's Center for Latin America and Director at the Center for American Studies at Fundación Libertad, Argentina.


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