This post is not intended for my usual readers. They already hold a Ph.D. in Argentine economic history! I sketched it out for foreign students who know very little of the economic and political history of Argentina and wish to have a taste of it. Though the following notes may also be of help for Argentines who find themselves in need of some material to comment to foreign business visitors. In particular, I wrote the notes to give a guest talk to a group of University-of-Kentucky graduate students who are visiting and trying to decipher Argentina.
I’ve been told that you want to learn about the Argentine history. I assume that you are basically interested in its social and economic history with an eye on current issues. I don’t need to say that such a topic is too wide to discuss with profit. Therefore I propose to do the following. First, make a list of the highlights of Argentine history from the point of view of free trade. Second, comment on key developments that took place in between. Third, draw a conclusion.
1776-1778 Creation of the Viceroyalty of the River Plate and enactment of the “Rules” of free trade
1810-1816 Revolution of May and Congress of Independence
1853-1862 National Organization
1930-1933 The Great Depression
Up to 1776 this part of the American continent was part of the Viceroyalty of Peru, it almost lived in commercial autarky, with little exchange of goods or ideas with Spain and close to nothing with the rest of Europe and America. Population was scanty, a few thousands Spaniards, more Indians than Spaniards, yet the place was under-populated. And it was very poor.
The viceroyalty was formed by present-day Argentina, Bolivia, Paraguay and Uruguay. Thanks to the Rules of free trade, the region of the Pampas (comprised by the provinces of Buenos Aires, Entre Ríos, Santa Fe and Córdoba), far away from Lima (Peru) and up to now the poorest of the viceroyalty, could increase its trade with Spain and the rest of the Spanish Empire and prosper somewhat.
The Revolution and the Independence brought a wave of free trade and prosperity to the region. The River Plate became a free trade state according to economic historians. The fundamental partner was Britain. The bad news was that Bolivia, Paraguay and Uruguay went apart during the Independence war and the following civil war. The ruling class of Buenos Aires wasn’t able to hold the union. It is a long story, hard to put in a nutshell.
In 1825 Buenos Aires signed with Britain the Treaty of Friendship, Navigation and Trade. This is a milestone. According to Juan Bautista Alberdi, a mix of Madison and Hamilton, thanks to the treaty Buenos Aires could avoid complete disgrace during the dictatorship of Juan Manuel de Rosas. Later on, the treaty would become the legal foundation of Anglo-Argentine trade until the Great Depression, well into de 20th century.
Rosas was defeated in battle in 1852. The civil war ended and a Constitution based on the American model was approved. This is the period of the National Organization. The time of Alberdi, Sarmiento, Urquiza, and Mitre, who are the founding fathers of modern Argentina. The political understanding between Buenos Aires and the Interior provinces meant peace and the effective launching of a program of massive European immigration and British investment in trains, ports, telegraphs. Population jumped from 1.6 millions in 1861 to 7 millions in 1905; income per capita rose from less than 40% of the Anglo-Saxon average (Australia, US and Britain) to more than 100% in the years before WWI. This phenomenon has been called the Argentine miracle. A modern country was built in just a generation.
A well-known Canadian historian, H. Ferns, drawing on the Foreign Office Archives, wrote that Argentina was at that time an informal part of the British Empire. A. Rivas, a well-known Cuban-Argentine economic and law author, wrote that we have to search for an explanation of the miracle in the substitution of the common law for the laws of Indias, that is, the Spanish mercantilism.
In spite of WWI, which cut trade with Britain to a half; the Russian Revolution, the fall of the Weimar Republic and the rise of European fascism, which had a heavy impact on domestic public opinion against democracy and free trade, the Argentine ruling classes didn’t want to break the country’s bond with Britain. They didn’t know where to head for instead. The Great Depression, and Britain’s response to it, determined the end of the Anglo-Argentine Treaty. So Argentina withdrew apart from the World. The US, Britain and Australia had the ability to return to a free-trade policy sooner or later. Argentina couldn’t follow their steps.
Since the Great Depression, Argentina has gone through industrial protectionism, nationalizations, hyperinflation, bank runs, political turmoil, and international isolation. Together with Brazil, it is one of the closest economies of the World. Its income per capita is nowadays less than 40% of the Anglo-Saxon average.
In my view the Argentine problem lies in not having been able to overcome the Great Depression and its legacy of economic nationalism. Argentina badly needs to be part of something greater. It must realize that a good economic policy comes hand in hand with a good foreign policy. We need a more cosmopolitan approach to public affairs.