False Economy - Alan Beattie [18]
Argentina was not in fact following the American path of industrializing initially behind tariff barriers, then going on to let its companies loose on world markets and expose them to more competition. The import-substitution model was designed to distance Argentina from the rest of the world economy, not to prepare Argentine companies to compete in it.
The use of import tariffs to support the first stages of industrialization is known as "infant industry" protection. In America, the protection was temporary, though it did persist for decades. In Argentina, the infants knew from the beginning that they would never have to leave the nursery, or at any rate that their mewling, if it became voluble enough, would ensure that the door remained closed. The American style of capitalism was quickly Argentinized, turned into a cronyish, corrupt game where access to protection and subsidies from the state were more important than competitiveness. Argentine cars cost twice as much as
American cars, and frequently broke down. Their washing machines and radios were clunky, expensive, and unreliable.
After a while, it became evident, in country after country, that the whole model of import substitution was flawed. Import-substitution economies sputtered and stalled. Although imported consumer goods were blocked, raw materials and components for industrial production had to be admitted, and at prices elevated by taxation as they passed through customs. Since exports had been discouraged, and in any case were often not competitive on world markets without hefty government subsidies, this meant Argentina again and again ran into balance-of-payments problems, its exporters failing to earn the dollars the economy needed to buy imports.
The country's political development followed its frog-march industrialization. Peron himself was forced out in 1955 (he would later return), but Peronism survived. The strains on government spending from the lavish promises of social welfare that Peron had made to the urban workers meant that the government was also often in deficit. Frequently it printed money to escape the problem, and rising inflation eroded the value of the debt it owed its own people. And when the stability of the Bretton Woods system broke down in the early 1970s, as even the United States struggled to balance its budget, Argentina's defining trait came to the fore. Argentines might not have known how to build, but with an expertise stretching back to the 1890 Barings crisis and beyond, they most certainly knew how to borrow.
No countries except net exporters of oil did well in the 1970s. Even America had double-digit inflation as the terms of trade turned decisively against its economy and in the direction of Arabia. But at least the United States, being a creditworthy country, could continue to borrow in dollars. (It still can today, in one of the saving graces of America during financial crisis.) New York City nearly went bankrupt in 1975, but the federal government rescued it. The Watergate scandal shook, but did not destroy, the stability of the republic. Gerald Ford may have sounded more confident than he felt when he said, on taking over from Richard Nixon, "This is a government of laws and not of men. Here, the people rule." He was, nevertheless, essentially right.
Argentina had gone much further toward losing that trust. In fact it was surprising that so much trust remained, and, perhaps, ultimately unhelpful, given that lenders gave Buenos Aires more and more rope with which to strangle itself. Despite its turbulent history, Argentina was regarded more favorably than many other developing