At the NY Times Economix blog, economist Edward Glaeser asks, "What Happened to Argentina?":
A century ago, there were only seven countries in the world that were more prosperous than Argentina (Belgium, Switzerland, Britain and four former English colonies including the United States), according to Angus Maddison’s historic incomes database. In 1909, per capita income in Argentina was 50 percent higher than in Italy, 180 percent higher than Japan, and almost five times higher than in neighboring Brazil. Over the course of the 20th century, Argentina’s relative standing in world incomes fell sharply. By 2000, Argentina’s income was less than half that of Italy or Japan.
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Why did that once-wealthy nation do so poorly?
He then compares Argentina to other countries in terms of specific policy choices, beginning as follows:
In its pre-World War I heyday, Argentina thrived as a trading giant shipping beef and grain abroad. After World War II, formerly poor countries including Japan, Korea and Italy followed an export-led model to wealth. A combination of external shocks (two world wars and the Great Depression) and protectionism caused Argentina to turn inward.
I am a little skeptical of this part. I often hear talk about how certain countries were "protectionist" and "inward," while others used an "export-led model." But in reality, wasn't every country protectionist, expecially during the development stage? Japan and Korea certainly were, and that's my impression of the rest of the developed world, too (maybe not England, but that situation is a little different because it was the first to industrialize). Now, it is possible that Japan and Korea focused on exports of industrial products more than Argentina did, so perhaps this is a relevant factor in some way. But as I understand it, part of the way they "focused on exports" was setting up protected domestic markets to give advantages to domestic companies, and then giving incentives to these companies to export. As a result, I'm not sure that the difference between Argentina and Japan/Korea -- if there really is a difference -- is exactly as it is presented here.
I'm more sympathetic to the next part:
Peronism was not only protectionist, but it also favored large state enterprises and significant regulation of the economy. Neither strategy has been particularly good for growth. Argentina’s inbred banking system has historically had trouble weathering severe shocks. Decades of political instability have made property rights insecure and investment unattractive.
Perhaps the state enterprises issue is important. My recollection of Japan and Korea is that while the economy was heavily regulated and they were protectionist, industrial production was mostly by private companies. So maybe there is something there, although I'm not sure of the actual situation in Argentina in this regard.
He later turns to education:
As the next figure shows, no variable from 1900 better explains success in 2000 than investment in education.
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Schooling is measured by the share of the relevant populations that was enrolled in primary, secondary or tertiary schooling. Argentina may have been rich, but it was not that well-educated. In 2000, Argentina was doing about as well as would be expected based on its education levels in 1900. Long-run national success is built on human capital, both because of the link between schooling and technology and because of the link between education and well-functioning democracy.
I've always thought education levels were more important than development economics (as I learned it) usually gave them credit for. It would be interesting to see direct comparisons between Argentina and Japan/Korea over the past 100 years or so. A chart in the Glaeser post seems to show Japan ahead of Argentina in terms of "school enrollment" in 1900, but more detailed information on this would be useful.
