False Economy - Alan Beattie [10]
The American commerce-finance-business establishment got another scare in the 1890s. Farmers from both northern and southern states, seeing their prices drop as a result of global oversupply, wanted in effect to print more money by fixing the dollar to the price of more plentiful silver rather than, as it was then, to the price of gold. The "Populist" political movement arose to press their case. But the investment and business community regarded the link to gold as essential to the country's position as a financial and trading hub. It ensured that the dollar kept its value both against other leading currencies, such as the pound sterling, which were also fixed to the gold price, and in terms of what it could buy. The limited amount of gold in the world also meant that all currencies linked to it were kept in short supply, imposing a rigid financial regime that left policymakers unable to respond to economic downturns with looser monetary policy. The presidential election of 1896, which turned largely on the issue, was close. But William McKinley, who backed the continuation of the gold standard, defeated William Jennings Bryan, who had thundered: "You shall not crucify mankind upon a cross of gold."
Yet even though the central demand of the Populists was defeated, the discontent that it reflected was not ignored. Discontent had arisen in the last decades of the nineteenth century for a reason that will seem all too familiar today. Unregulated finance capitalism appeared to be enriching a powerful minority while subjecting everyone else to the vagaries of a volatile economy. The United States learned that this was not sustainable. And because it was a democracy, however imperfect, it reacted.
The Progressive movement arose to restrain the excesses of the first era of globalization. Theodore Roosevelt, president in the years 1901—1909, showed that America was capable of maximizing and redistributing the harvest of golden eggs without killing the goose. Campaigns of trust-busting broke up exploitative monopolies, and new legislation protected consumers from impure food and medicines. Later, the U.S. Constitution was amended to allow a national income tax and to guarantee women the vote. Confidence in the government remained. By adapting, the American system survived. Argentina, by contrast, remained stuck in its old ways. Economically, it had a single world-class sector, dependent on demand, its capital and technology all imported from abroad. That turned out to be a poor choice.
The twentieth century was a time of change and cataclysm, of markets opened and snatched away, a time that rewarded rapid and flexible reactions to unprecedented and unforeseeable events. Buenos Aires got a glimpse of the future in 1890, when Barings, one of the best-known British banks, nearly collapsed after overextending loans in Argentina. The Argentine government, dependent on overseas borrowing, had to declare a moratorium on repaying debt in 1891. (As a child of the Spanish empire, Argentina was following a family tradition: Philip II, king of Spain in the sixteenth century, was history's first serial sovereign defaulter, failing to honor his debts four times.)
An economy like America's, with a nimble and productive industrial sector, was well placed to take advantage. An economy like Argentina's, however, grown fat and complacent endlessly borrowing foreign money to pump out grain and corned beef to foreign markets, was not. By the end of the nineteenth century, pretty much all the fertile land had been taken. There were no more frontiers to be pushed forward, and hence, apart from the steady upward grind of a rising population and increasing agricultural productivity, Argentine farming had, to all intents and purposes, taken the country as far up the ladder of nations as it could.
America may have entered the twentieth century as a country whose defining myth of self appeared still to be the amber waves of grain stretching from sea to shining sea. But in reality its immediate