A Historical Review of the Economic Development of Argentina and Modern Socioeconomic Innovation Strategies


Academic Paper, 2019

11 Pages, Grade: University


Excerpt

The Argentine Republic is a developing nation that is located in South America, situated in the southern region of the continent. Argentina is bordered by four countries - Chile, Bolivia, Uruguay and Paraguay - and the Atlantic Ocean to the east. The country sustains a total population of 44,495 million people, with the capital Buenos Aires, as the largest city. However, 33.6% of Argentines live below the poverty line according to statistics proposed in the third quarter of 2018. This equates to an estimate of 13.6 million people that have financial obstacles hindering their access to adequate food and necessities, positing that Argentina is a developing nation (MecroPress, n.d.). The turbulent historical progression of the Argentine economic sector was victimized by the total economic condition of Latin America impacted by the culmination of WW1 and WW2. The predominant forces and events that have shaped the economic condition of Argentina from the post-WWII era, include Juan Peron's regime of the 1950' s, the 1989 era of democratic return to Argentina, and Carlos Menem's regime of the 1990' s.

As of statistics in the recent years, the unemployment rate of Argentina averaged at 9.5% (Statista, n.d.), and the gini coefficient, measuring income distribution and inequality, was at 42.4% (World Population Review, n.d.). Latin America has the most unequal income distribution globally, posing that the poor receive less of a share of the national income than poor populations in other continents. Therefore, poverty rates in Latin America are higher when compared to other countries with similar average incomes, such as Asia, which is contrarily, the continent with the largest poor population in the world. The fairly high gini index demonstrates that the Argentine population experiences a high unequal income distribution, which is an obstacle towards holistic economic development for the total population (The World Bank, 2014).

The impacts of pre-World War period (WW1 and WW2) and post-WW2 period greatly contributed to the current state of economic crisis, unemployment and fluctuating income distribution measures the total population is currently subject to in Argentina. Post-WWI Latin America pursued an export led economy to maximize profit in trade, however restrictive fiscal measures impeded growth in exports and industry. During the Great Depression, Latin American countries became particularly dependent on export trade, producing economies sensitive to falling prices of goods and services. Decline in prices, because of global adjustment to post-WWI, impacted Latin American exporters. Though during this time, a leading issue in the stagnance of exports was due to slow growth of total world trade. For instance, exports remained 1% annually for six prime Latin American commodities including silver, barley and wool. Latin American countries were not able to completely immerse in the advent of industrialization because declining export rates made it difficult to encourage manufacturing causing dependency on imports.

Post WWI-era marks the end of the Argentine "Golden Age" and successful involvement in international trade, through the lack of industry due to the inability to import goods. During this time, the GDP contracted, unemployment increased and the federal government faced fiscal deficits. In the 1930's, the Great Depression played a role in Argentina's export demand, as US and European incentive for agricultural exports stagnated, stammering Argentina's economic expansion (World Bank, 2019). With unsteady government revenue, insecure wage payments to workers produced mass social unrest and civil protest in Argentina. The crisis called for governmental change, in which a military coup d'etat set a trend for military officers to govern until the end of the century.

Subsequently, World War II infringed on the economic and industrial expansion of Argentina, halting capital flow and ceasing development of capital production to maximize and stimulate the economy through consumer-producer exchange. In the post-WWII era, the rise of Juan Peron, catalyzed economic prosperity with a growing economy of 6% annually (Univ of Pittsburgh, 2009). Peron was a populist favoring the working class, focusing on loosening economic conditions by raising wages and incentives. His vision was to transform an agricultural economy to an industrial economy. The government had regulations over industries and the economy, implementing a socialist regimen of market control (Univ of Pittsburgh, 2009). Moreover, several industries were privatized by the government, particularly transportation, energy and the public service sectors such as water, and gas. Peron also focused on wealth redistribution and equitable, fair allocation of wealth to sustain a thriving middle class, and provide welfare to those in poverty. Throughout his term, government spending almost doubled at about 29%, and money supply expanded (Routledge, 2006). Therefore, to fund his economic plan, Peron established the Argentine Institute for the Promotion of Trade, allowing the government to monopolize and become the only institution to engage in the trade of agricultural production in the global marketplace. For instance, international exchange of agricultural products would require farmers to sell their products to the IAPI, in which IAPI would be in charge of the actual exchange of the products in the marketplace (Univ of Pittsburgh, 2009). This would give IAPI and the government an advantage towards higher profit, than if operated otherwise. This system was strategic of Peron because it generated revenue for the government that could be allocated for domestic economic development.

In 1950 however, natural forces such as droughts, decreased agricultural production capabilities, consequently resulting in a substantial decrease in export potential. This condition damaged the Peronist reforms and IAPI system because the economic model was based on profit gains from agricultural exports (Univ of Pittsburgh, 2009). With natural disasters impacting economic movement and trade abilities, salaries stagnated, commodity prices fell, investments declined, and the inflation rate plummeted 40% (Routledge, 2006). However, upon his re-election in 1952, Peron decided to implement another economic plan to encourage agricultural production growth (Routledge, 2002). The government decided to reduce fiscal spending, and open privatized industries for opportunities of foreign investment. These changes boosted economic circulation, by decreasing inflation and expanding the GDP (Univ of Pittsburgh, 2009). This system was however a fairly expensive plan, causing an increase in taxes and overinvolvement in industries (energy, water) leading to civil unrest. Therefore, following a series of labor strikes a military coup d'etat followed putting an end to the domestic socioeconomic tension, concluding Peron's rule. Lasting only 10 years, the Peronist regime revolutionized the fiscal structure of Argentina, and its' course of economic and social development, by privatization measures and strategic politics - populism (Routledge, 2006).

Furthermore, following a series of coup d'etat's and military governances, Argentina's economic sector was unstable, caught in between the fluctuation of radical fiscal policies. Governmental officials were also constantly circulating and changing - the lead minister for economic affairs was replaced once a year between the 1950' s and 1980' s (The Latin American..., 1991). With this governmental uncertainty, civil nostalgia towards the Perosnist regime sparked. Though upon Peron's death, his third wife ruled until military factions planned yet another coup d'etat (The Latin American..., 1991). In 1982, the Argentine military invaded the Falkland Islands, which is a British colony asserted possession by Argentina. The British combated with victory, weakening the Argentine legitimacy in the domestic sphere (between civilians and government). The armed forces were also widely involved in human rights abuses, drug smuggling, human trafficking, and inefficient economic regulation. Consequently, with the loss of the Falklands War, many civilians lost faith in their power, and saw them unfit to regulate an economy and governmental sphere (The Latin American..., 1991). However, with the rule of President Raul Alfonsin, an era of social democratic rule came along Argentina, though the system did not guarantee economic stability. For instance, public payrolls swelled while government revenues remained stagnant. In 1989, only 30,000 people out of a 30 million total population of Argentines paid their income taxes, inflation also rose 5000% (OECD, 2019). Accordingly, with civil unrest, fluctuating prices, and labor strikes President Alfonsin resigned giving way to the Menem Era. The democratic era of Alfonsin reinforced citizens sense of trust in politicians governing economic and political institutions rather than military factions. The lack of trust in military governments (political structures run by warlords) is still a prevalent ideology amongst Argentine civilians today.

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Details

Title
A Historical Review of the Economic Development of Argentina and Modern Socioeconomic Innovation Strategies
College
University of California, Berkeley
Course
Development & Globalization
Grade
University
Author
Year
2019
Pages
11
Catalog Number
V907160
ISBN (eBook)
9783346214584
Language
English
Tags
argentina, development, economic, historical, innovation, modern, review, socioeconomic, strategies
Quote paper
Emily Ekshian (Author), 2019, A Historical Review of the Economic Development of Argentina and Modern Socioeconomic Innovation Strategies, Munich, GRIN Verlag, https://www.grin.com/document/907160

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