Lessons from Argentina on economic decline

Once upon a time, Argentina was a very rich country. There is little disagreement that this time was in the period before WWI. According to della Paolera and Taylor (2003), Argentina’s 1913 level of per capita income (USD 3,797 in 1992 US Dollars) compared favorably to that of France (USD 3,452) and Germany (USD 3,134.) Large inflows of foreign physical, human, and financial capital shored up the expansion of primary products exports (grain, meat, wool and leather) which fueled rapid economic growth. 

Disagreement is seldom about whether the fall occurred and mostly about when and why. Some argue that the decline started with the Great Depression (e.g. Diaz-Alejandro 1985). Conde (2009) associates its beginning with WWII, Taylor (1992) argues for 1913, and Sanz-Villarroya (2005) estimates an even earlier structural break in 1899, while Campos et al. (2012) report Bai-Perron estimates supporting two main structural breaks (1922 and 1964). Yet by 1947 Argentina was still ranked 10th in the world in terms of per capita income and della Paolera and Taylor (2003) estimate that the ratio of Argentina’s to the OECD’s income declined to 84% in 1950, to 65% in 1973, and then to 43% in 1987. It rebounded in the 1990s but with the run-up to the 2001 crisis again reverted. 

Lessons from Argentina on economic decline.