A New Century of Mob Rule in Argentina

Cristina Elisabet Munter Fernández de Kirchner was reelected la presidenta of Argentina over the weekend.

Before we waste any more words on her victory, let’s take a look at some more pressing local matters.

The sun is shining in Argentina today. It rained over the weekend. The weather tomorrow calls for clouds. Oh yes, and the tree out front of our office is beginning to grow up over the balcony. We’ll need to trim it back soon.


Politics here in Argentina is a strange business indeed…even for the business of politics. Rarely in our travels have we encountered a more politically apathetic people than the Argentines. Yet, curiously enough, those who do care about what happens in the Casa Rosada and the halls of Congreso tend to hold their beliefs rather fervently, oftentimes bordering on a perverse fanaticism of the stripe usually reserved on this continent for the people’s beloved game, fútbol.

We’re generalizing, of course, basing our own opinion almost entirely on anecdotal evidence. But talk to most people here, those who don’t attend political rallies, who are not paid piqueteros (professional protesters), and you can’t help escape the feeling that they’d be quite happy to never hear a politician’s promise again, nor suffer the consequences when that promise is invariably dishonored.

The cab drivers, shopkeepers and waiters complain ceaselessly about the sorry state of their country; the rampant inflation, the shuttered factories, growing poverty, a gutted agricultural industry, rail lines left to rot under the sun, about the good old days, now gone, it would seem, forever.

Not surprisingly, official statistics tend to disagree with the observable reality but, for the most part, the people seem to know what’s what. They know they can buy less today than yesterday, both because of inflation (officially at 10%realistically more like 25%) and strict controls on trade. They know too that Uruguay now exports more beef than they do, a quiet but national embarrassment. And they know that they can’t travel like their grandparents used to, in grand, stagecoach style.

But then, come election time, the people line up at the ballot box to put another bum in another presidential seat. Not that they have much choice in the matter. Voting here is mandatory. A strange business indeed.

Argentina also has the dubious honor of being one of the world’s only “first world” nations to have achieved “third world” status. For that, the people here have a half-century and more of political meddling to thank. We’ve traced this slow decline in past reckonings…

At the turn of the 20th century, Argentina was ranked as the 8th most prosperous nation on earth. Only Belgium, Switzerland, Britain and a handful of former English colonies – including the United States – were more favorably positioned, economically. In 1913, Argentina’s bustling, cosmopolitan capital, Buenos Aires, had the thirteenth highest per capita telephone penetration rate in the world. Her per capita income was, around this time, 50% higher than in Italy, almost twice that of Japan and five times greater than its northern neighbor, Brazil. Argentina’s industry churned out quality textiles and frigorificos (refrigerated ships) carried her prized beef, first introduced in 1536 by the Spanish Conquistadors, from the fertile plains of the pampas to the farthest reaches of the known world.

As the century wore on, protectionist policies at home and increased competition from the post-WWII, export-led economies abroad colluded to undermine Argentina’s international edge. From 1900 through to the beginning of the new millennium, Argentina’s real GDP per person grew at a rate of 1.88% per year. Brazil outpaced her handily, clocking a 2.39% annualized growth rate. Japan, starting with a real GDP per person of just over $1,500 (2006 dollars) at the turn of the twentieth century, grew an average of 2.76% per year. By the middle of this decade, Japan’s real GDP per person was double that of Argentina.

War, currency debasement, civil unrest, military rule and the usual catalyst of politicians, equally corrupt and inept, all conspired to stultify Argentina’s vast potential. The great Argentine poet and essayist, Jorge Luis Borges, described one such retarding factor with characteristic flare and wit: “The Falklands thing was a fight between two bald men over a comb.”

To be sure, the latest presidential race was one for the record books, a victory by a landslide margin. While the winner picked up more than half of the total votes, her nearest rival managed less than one fifth. Not that majorities – however overwhelming they might be – ought to inspire confidence of any sort. Usually the quite the opposite. Here we recall theologian Douglas Wilson’s Gadarene Swine Rule: Just because a group is in formation, doesn’t necessarily mean it knows where it’s going. The Argentine people have spent the better part of the last century proving this maxim…as have majority voters in modern democracies around the world.

The last time this nation witnessed such a decisive presidential victory was 1983, when Raúl Alfonsín’s election saw democracy restored to the nation after seven years of military dictatorship. Alfonsín’s new government attempted to stabilize Argentina’s already struggling economy with the creation of a new currency, the austral. But new currency brings with it new temptation: the temptation to print more of it.

Although unemployment remained relatively steady under Alfonsín’s government, real wages actually fell by almost half to their lowest levels in nearly half a century. Inflation, which had already reached between 10 to 20% per month before the austral’s introduction, soon spiraled out of control. By July of 1989, the rate of inflation had reached 200% per month. By the end of the year it had topped 5,000% annually. The hyperinflationary episode opened the door to a decade of earnest political action (the worst kind)…which in turn opened the door to even more borrowing, more corruption, more money laundering and more crises to come.

Before the century was done, Fernando de la Rúa took the helm as president, handily defeating the ruling party’s candidate. But by 2001 people were back on the streets, making runs on the banks, banging their pots and pans up and down Plaza de Mayo, torching private property and calling for the overthrow of the government. Fernando de la Rúa eventually escaped from the roof of the Casa Rosada by helicopter as riots engulfed the capital city around him.

The majority got what they wanted…once again.

Joel Bowman
for The Daily Reckoning

The Daily Reckoning