Tuesday, September 04, 2018

Cycles of Argentine Economic Woes

In the 1990s, Carlos Menem pushed a series of market reforms (including the infamous dollar peg) to finally cure the woes of the Argentine economy. Then the global economy slowed, Brazil devalued, and things fell apart. The pain of austerity measures gave way to the rise of leftist populism under Néstor Kirchner and Cristina Fernández. They were going to solve the problems that Menem created.

After years of their two administrations, Argentina had sunk back down again, and here we are. Since 2015, Mauricio Macri has been unable to deal with debt and the weak peso, and just announced his own austerity measures as the peso plunged and investors lost confidence. There will be pain again.

There is a sad and ideology-free flavor to this. If you are an Argentine voter, who do you turn to? Do you just retreat to clientelist relationships?


Mandramas 8:46 AM  

Yeah, the 10-20 year cycles are deeply ingrained in popular culture. But the reality is more complex than that. I think the cycle is a two stage arrangement: a stage of nationalist protectionist where the upper classes amass wealth but they are unable to use it, and an open market stage where the upper classes can use the wealth but they crash the local economy. The length of the stages varies; usually peronist governments are able to avoid a full crash, but the non-peronist government aren't so lucky.

Greg Weeks 9:01 AM  

Sure, anything will be more complex than a quick blog post, but the point I was really thinking about was how to even deal with it as a voter, no matter what the precise nature of the cycles were. If you're right, then as the median voter you go for the leftist Peronist as the least bad, or the least likely to preside over a massive crash.

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