False Economy - Alan Beattie [11]
Like the American Civil War, the First World War is an obvious candidate for historians searching for a marker indicating the end of the first Golden Age. Certainly the international flows of capital and trade peaked in 1914 and would be sharply lower between the two world wars. But with money and guns suddenly in short supply, the war itself was a good time for countries boasting the trifecta of capital, factories, and peace. Standing profitably aloof from the mud of Flanders until late in the war, the United States did rather well out of it. Constructing a neat system of vendor finance, it lent Europeans the money to buy its armaments exports with which to kill one another. By the end of the war, American industry had decisively become the best in the world, and the country had shifted with striking speed from being a borrower of European capital to being a net creditor.
In the face of a long and inconclusive war, the European countries, for their part, sold off assets around the world—particularly France, which had to write off investments in Russia after the 1917 Bolshevik Revolution. The United States picked up some of them cheaply, its decades of higher savings paying off. Argentina did not. It had been so dependent on foreign borrowing that a decline in international investment, and specifically a sell-off of assets by the British, posed a threat rather than an opportunity. In 1914, half the fixed capital in the country—railways, factories, the telegraph, meatpacking plants—was owned by foreigners. Suddenly the previously submerged question of exactly who was paying for Argentina's infrastructure surfaced. After five decades of narrowly focused foreign investment and export activity, Argentina was a glorified export zone, not a global financial power.
The stresses of the interwar years, and especially the Great Depression after 1929, revealed how America and Argentina had entered different camps. At the time, the Depression appeared to be a crisis of the whole of capitalism rather than of any single variant. Both American and Argentine cities were encrusted with reminders of economic dislocation—the shantytowns known as Hoovervilles in the United States, so named for the hapless Depression-era president Herbert Hoover, and the villas miseria in Argentina.
Many in the United States and in Latin America drew the same conclusion: that a crisis transmitted so rapidly through international markets for goods and money showed the foolishness of relying on global entanglements. But the political systems of America and Argentina reacted in critically different ways. The Depression drove a wedge between them that would later cleave into a wide gulf between democracy and dictatorship.
Between 1880 and 1914, the American political system was reacting to change, absorbing new ideas and addressing the demands of the discontented, even if only in limited fashion. But Argentine politics remained steadfastly dominated by a small, self-perpetuating elite. The American equivalent might have been a dynasty of former Confederate officers permanently camped in the White House and on Capitol Hill after their victory in the Civil War, with politics limited to a series of internal spats. Although politics was often conducted with great drama, the political spectrum was stiflingly narrow.
A country can inoculate itself against political extremism by allowing a weak version of the virus to circulate freely. Nations thus strengthened and confident were always more likely to be able to cope with the extraordinary challenges thrown up by the aftermath of the stock market crash of 1929 that began on Wall Street and spread instantaneously to Europe. The very fact that the economic crisis sprang from the collapse of stock prices in New York, one of the world's biggest financial centers, raised fundamental questions about the worth of liberal democracy as well as free-market economics.