I am a Chilean living in Chile. I am married with and Argentinian and usually travel to see her family, so I am very familiar with their domestic dynamics and even from the perspective of another emerging country citizen the things that happened in that country were and still are absolutely baffling.
The level of systematic and brazen corruption at virtually every institutional lever of the three powers of government with minor and very slow consequences has for all intents and purposes made the rule of law inexistent if a political/kleptocratic imperative is in the way.
The size and quality of government spending is ludicrous, central and local governments are plagued with political appointees that in many cases don't even care about showing up to work. And literally more than half of the population receives some kind of government transfer (planes sociales).
The unions in the country are extremely powerful and frequently use violence and intimidation to get what they want; their bosses are millionaires (nobody knows how) and in practice govern their unions for life and sometimes even pass on the leadership to their sons (sindicato de choferes y camiones).
If you compare the evolution of other Latin American countries (not a very demanding peer group) from your decline starting point to today, you can see that something very specific affected Argentina. And I don't think that a lack of natural resources was ever the cause.
So obviously I think that domestic factors are much more important in explaining the decline of Argentina, and I don't think that is possible to explain the phenomenon of Milei in any other way.
I agree that Argentina has peculiarly bad politics, with negative consequences for its institutions. I also think that better politics and institutions would be a good in their own right.
However, I’m not sure that the bad politics/institutions are why Argentina’s GDP per capita performed poorly in the twentieth century. I like, for instance, the comparison with New Zealand:
New Zealand has fantastic politics and institutions, but it’s GDP per capita growth has been the same in PPP terms as Argentina’s since the 1960s.
Regarding other Latin American countries, Argentina was very much the pioneer, and the other countries have been catching up since then. That’s quite normal. See, for instance, the United Kingdom and the rest of Europe.
Very interesting case indeed. I have a single but very large comments regarding Argentina's natural resources.
I completely understand that Argentina's economy was and still is heavily based on agricultural activities, and any movement away from that would take time and be challenging, but was there a real lack of mineral deposits/fossil fuels reserves or was there something particular to Argentina that made their development impossible?
Here are a couple of examples that come to mind as those have also affected Chile (the second one is funnier or actually tragicomical):
In the last couple of years in Chile one single company exporting fertilizers and lithium paid more taxes to the state than the entire surplus that Codelco (the biggest copper mining company in the world) delivered. And those exports came from a set of natural resources of a geological region that is shared by Chile, Bolivia and Argentina.
Apart from that, I still remember vividly one particular "anecdote" as it had very significant implications for local utility companies that I was in charge of covering at the time as an equity analyst.
During the late 90s and early 2000s Chile developed a very significant amount of thermal electricity generation plants based on natural gas that came from Argentina through a pipeline system, that was a big project in and on itself.
Those plants with some other coal-based ones served as baseload energy that was supplemented by hydro generation depending on each year's conditions. On average the system was 50/50 thermal/hydro.
So, a couple of years before the 08-09 GFC the lack of investments in argentina (the reserves were and are still there) meant that they started reducing their gas deliveries as their own consumption grew. That lead to the upgrade of many of Chile's gas-powered plants to allow them to burn oil in case of the recurrence of these "improbable events".
That was obviously wishful thinking, because right in the middle of the GFC gas deliveries for energy generation for all intents and purposes stopped completely and all of those plants ended up burning oil, that just at that time reached its all-time high of 147 USD.
The macroeconomic impact for Chile was probably as significant as what it has been for Europe after Russia's invasion of Ukraine, but all those details are beyond the point.
On the years after the total end of gas deliveries, Chile built a couple of regasification terminals to support energy diversification and that of course came at multiples of the price we used to pay for the gas that came from Argentina.
And the punchline is that in the mid 2010s as nothing changed regarding investments in argentina, in years with good hydrological conditions part of the expensive liquified gas that was acquired on a take or pay basis ended up being exported to Argentina using the same pipeline system that was originally built for their exports.
I do not know what the macroeconomic potential of those industries is, but I can assure you that those are not the only ones that have been left undeveloped, as when I was in the south of Argentina a couple of years ago a group of protesters literally burned the "Casa de Gobierno" because of the approval of a mining act that allowed for the development of a silver mine in the region. And of course, after that, the law was struck down.
Could one argue that 1946-47 prices were distorted due to Peron’s agricultural policies, which would make the pre-1930 economy smaller when you extrapolate backwards?
Relative prices were massively distorted through the post-war decades. During the first Perón governments, quantitative controls on imports were the big issue. I wrote a bit about it at my old blog here: https://www.joefrancis.info/arbitrage-and-import-controls/.
In theory, PPP prices should control for distortions, but they’re quite hard to calculate in practice. In the first couple of graphs in this blog, you can also see that PPP and nominal prices do tend to have similar trends in the long run. Really, there’s no ideal measure and I think it’s good to consider multiple metrics and be aware of their shortcomings.
I am a Chilean living in Chile. I am married with and Argentinian and usually travel to see her family, so I am very familiar with their domestic dynamics and even from the perspective of another emerging country citizen the things that happened in that country were and still are absolutely baffling.
The level of systematic and brazen corruption at virtually every institutional lever of the three powers of government with minor and very slow consequences has for all intents and purposes made the rule of law inexistent if a political/kleptocratic imperative is in the way.
The size and quality of government spending is ludicrous, central and local governments are plagued with political appointees that in many cases don't even care about showing up to work. And literally more than half of the population receives some kind of government transfer (planes sociales).
The unions in the country are extremely powerful and frequently use violence and intimidation to get what they want; their bosses are millionaires (nobody knows how) and in practice govern their unions for life and sometimes even pass on the leadership to their sons (sindicato de choferes y camiones).
If you compare the evolution of other Latin American countries (not a very demanding peer group) from your decline starting point to today, you can see that something very specific affected Argentina. And I don't think that a lack of natural resources was ever the cause.
So obviously I think that domestic factors are much more important in explaining the decline of Argentina, and I don't think that is possible to explain the phenomenon of Milei in any other way.
I agree that Argentina has peculiarly bad politics, with negative consequences for its institutions. I also think that better politics and institutions would be a good in their own right.
However, I’m not sure that the bad politics/institutions are why Argentina’s GDP per capita performed poorly in the twentieth century. I like, for instance, the comparison with New Zealand:
https://www.thepoorrichnation.blog/p/a-new-zealand-shaped-spanner
New Zealand has fantastic politics and institutions, but it’s GDP per capita growth has been the same in PPP terms as Argentina’s since the 1960s.
Regarding other Latin American countries, Argentina was very much the pioneer, and the other countries have been catching up since then. That’s quite normal. See, for instance, the United Kingdom and the rest of Europe.
Very interesting case indeed. I have a single but very large comments regarding Argentina's natural resources.
I completely understand that Argentina's economy was and still is heavily based on agricultural activities, and any movement away from that would take time and be challenging, but was there a real lack of mineral deposits/fossil fuels reserves or was there something particular to Argentina that made their development impossible?
Here are a couple of examples that come to mind as those have also affected Chile (the second one is funnier or actually tragicomical):
In the last couple of years in Chile one single company exporting fertilizers and lithium paid more taxes to the state than the entire surplus that Codelco (the biggest copper mining company in the world) delivered. And those exports came from a set of natural resources of a geological region that is shared by Chile, Bolivia and Argentina.
Apart from that, I still remember vividly one particular "anecdote" as it had very significant implications for local utility companies that I was in charge of covering at the time as an equity analyst.
During the late 90s and early 2000s Chile developed a very significant amount of thermal electricity generation plants based on natural gas that came from Argentina through a pipeline system, that was a big project in and on itself.
Those plants with some other coal-based ones served as baseload energy that was supplemented by hydro generation depending on each year's conditions. On average the system was 50/50 thermal/hydro.
So, a couple of years before the 08-09 GFC the lack of investments in argentina (the reserves were and are still there) meant that they started reducing their gas deliveries as their own consumption grew. That lead to the upgrade of many of Chile's gas-powered plants to allow them to burn oil in case of the recurrence of these "improbable events".
That was obviously wishful thinking, because right in the middle of the GFC gas deliveries for energy generation for all intents and purposes stopped completely and all of those plants ended up burning oil, that just at that time reached its all-time high of 147 USD.
The macroeconomic impact for Chile was probably as significant as what it has been for Europe after Russia's invasion of Ukraine, but all those details are beyond the point.
On the years after the total end of gas deliveries, Chile built a couple of regasification terminals to support energy diversification and that of course came at multiples of the price we used to pay for the gas that came from Argentina.
And the punchline is that in the mid 2010s as nothing changed regarding investments in argentina, in years with good hydrological conditions part of the expensive liquified gas that was acquired on a take or pay basis ended up being exported to Argentina using the same pipeline system that was originally built for their exports.
I do not know what the macroeconomic potential of those industries is, but I can assure you that those are not the only ones that have been left undeveloped, as when I was in the south of Argentina a couple of years ago a group of protesters literally burned the "Casa de Gobierno" because of the approval of a mining act that allowed for the development of a silver mine in the region. And of course, after that, the law was struck down.
https://www.infobae.com/fotos/2021/12/17/chubut-en-llamas-las-imagenes-de-los-incidentes-durante-la-movilizacion-contra-la-ley-de-mineria/
Could one argue that 1946-47 prices were distorted due to Peron’s agricultural policies, which would make the pre-1930 economy smaller when you extrapolate backwards?
Relative prices were massively distorted through the post-war decades. During the first Perón governments, quantitative controls on imports were the big issue. I wrote a bit about it at my old blog here: https://www.joefrancis.info/arbitrage-and-import-controls/.
In theory, PPP prices should control for distortions, but they’re quite hard to calculate in practice. In the first couple of graphs in this blog, you can also see that PPP and nominal prices do tend to have similar trends in the long run. Really, there’s no ideal measure and I think it’s good to consider multiple metrics and be aware of their shortcomings.