Tuesday, April 13, 2010

Is Argentina The Model For Where Obama Is Leading America?

I'm not an economic historian, but the following abbreviated history of Argentina rings true to me. Is this the pattern that Obama is following? Is this where America is headed? It doesn't look good. These are interesting and I fear, dangerous times.

Don't Cry For Me, America (source)

In the early 20th century, Argentina was one of the richest countries in the world. While Great Britain's maritime power and its far-flung empire had propelled it to a dominant position among the world's industrialized nations, only the United States challenged Argentina for the position of the world's second-most powerful economy.

It was blessed with abundant agriculture, vast swaths of rich farmland laced with navigable rivers and an accessible port system. Its level of industrialization was higher than many European countries: railroads, automobiles and telephones were commonplace.

In 1916, a new president was elected. Hipólito Irigoyen had formed a party called The Radicals under the banner of "fundamental change" with an appeal to the middle class.

Among Irigoyen's changes: mandatory pension insurance, mandatory health insurance, and support for low-income housing construction to stimulate the economy. Put simply, the state assumed economic control of a vast swath of the country's operations and began assessing new payroll taxes to fund its efforts.

With an increasing flow of funds into these entitlement programs, the government's payouts soon became overly generous. Before long its outlays surpassed the value of the taxpayers' contributions. Put simply, it quickly became under-funded, much like the United States' Social Security and Medicare programs.

The death knell for the Argentine economy, however, came with the election of Juan Perón. Perón had a fascist and corporatist upbringing; he and his charismatic wife aimed their populist rhetoric at the nation's rich.

This targeted group "swiftly expanded to cover most of the propertied middle classes, who became an enemy to be defeated and humiliated."

Under Perón, the size of government bureaucracies exploded through massive programs of social spending and by encouraging the growth of labor unions.

High taxes and economic mismanagement took their inevitable toll even after Perón had been driven from office. But his populist rhetoric and "contempt for economic realities" lived on. Argentina's federal government continued to spend far beyond its means.

Hyperinflation exploded in 1989, the final stage of a process characterized by "industrial protectionism, redistribution of income based on increased wages, and growing state intervention in the economy..."

The Argentinian government's practice of printing money to pay off its public debts had crushed the economy. Inflation hit 3000%, reminiscent of the Weimar Republic. Food riots were rampant; stores were looted; the country descended into chaos.

And by 1994, Argentina's public pensions -- the equivalent of Social Security -- had imploded. The payroll tax had increased from 5% to 26%, but it wasn't enough. In addition, Argentina had implemented a value-added tax (VAT), new income taxes, a personal tax on wealth, and additional revenues based upon the sale of public enterprises. These crushed the private sector, further damaging the economy.

A government-controlled "privatization" effort to rescue seniors' pensions was attempted. But, by 2001, those funds had also been raided by the government, the monies replaced by Argentina's defaulted government bonds.

By 2002, "...government fiscal irresponsibility... induced a national economic crisis as severe as America's Great Depression."

* * *

In 1902 Argentina was one of the world's richest countries. Little more than a hundred years later, it is poverty-stricken, struggling to meet its debt obligations amidst a drought.

We've seen this movie before. The Democrats' populist plans can't possibly work, because government bankrupts everything it touches. History teaches us that ObamaCare and unfunded entitlement programs will be utter, complete disasters.

Today's Democrats are guilty of more than stupidity; they are enslaving future generations to poverty and misery. And they will be long gone when it all implodes. They will be as cold and dead as Juan Perón when the piper must ultimately be paid.

References: A tear for Argentina's pension funds; Inflation in Argentina; The United States of Argentina. Linked by: Dan Riehl. Thanks!

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Jack Reylan said...

We need to go after the professulas who inflicted America-hating Trotskyite Deming Juran Japanese participative Toyotagate management on this country! "Industrial engineering" is soviet economics and "financial engineering" is soviet finance because they don't believe in free markets and try to manipulate trends instead. Bitter Gallusour impuned te intellect of GWB43. Climategate is what happens when universities become addicted on federal grants for research, so they invent catastrophes like Y2K or global warming to extort a bigger fix of money. This is a continuation of Climategate and ACORN/PIRG/ARA-gate, used to make America subservient to the professulas. If securities rules applied to federal research grants, half the professors would be in jail! The Professulas, trial lawyers and union organizers are Obama's core constituencies. Universities, libraries, museums and other public beneficiaries extort their patrons to lobby on their behalf using taxpayer resources. That's what ACORN and PIRG are about. They even encourage students to max out their loans and invest the proceeds so the school can up its total. Obama learned the trick when he worked for Don Kent at tuition-funded Arms Race Alternatives, while they denied admission to Young Americans for Freedom or even the pro-nuclear Social Democrats. Ted Markowitz used the Xerox 9700 to make fliers for the June 12th nuclear freezers, but persecuted students for smaller infractions. Look how they destroyed a supply side hero like Jeff Bell! Shows how much he valued free speech then and now, and who put him up to it, and what they were really up to, racketeering for federal funds. Sovern incited the 1968 riots so his cabal could get the booty: UPI June 6, 1992 Sovern took over at Columbia after student protests of 1968 and New York's fiscal problems in the '70s resulted in less financial support for the school, a situation made more dire by recent federal government budget cuts. . . But Columbia will be looking for a new president in a period troubled by criticism for destroying records that were being reviewed for improprieties. Universities in general have been under greater scrutiny for how they charge the government for federally sponsored research.

Anonymous said...

Oh, I thought this was a blog about climate science. It see that I was wrong. It's a blog about fear mongering and political hyperbole!

Silly me, and I thought Pete was a "scientist."

Anonymous said...

Yes....silly, silly you. Can you say anything intelligent?

Anonymous said...

Why yes, Anon, I have said many intelligent things on this particular blog. Intelligence tends to infuriate the various posters and ol' Pete himself. But, having read the above post, I am wondering what your version of intelligence is? Surely you are not mistaking this level or paranoid delusion with anything intelligent or even properly thought out?

Peter said...

I believe the analogy between the economic collapse of Argentina is comparable to what the socialist ("progressives"), leftist, statist, "nanny state", Democrats and Obama Administration is rapidly doing to America.

Anonymous said...

Economy's rebounding, Pete. And there are no police states around the corner unless you are a paranoid, right-leaning wing-nut. Or a Texan.

And I thought this was a blog about climate science?

Peter said...

The way the IRS and EPA act are not similar to and forerunners of a "police state"? If you don't see that you must be in La-La Land.

Man-caused global warming (or climate change) is a hoax being put over on the people as a dedicated effort to gain ever-more power and control by the government. Add to that the control over health care, banking, the auto industry, and the energy industry via "cap and tax" and you have a totalitarian statist regime similar to what led to the downfall of Argentina.

If you don't see that you're a fool.

Anonymous said...

Pete, you are getting more and more paranoid - I believe the kids call it "tweeked." One wonders if having a black president has driven you over the edge. I have a friend who thinks FEMA is setting up concentration camps in Indianapolis. Do you believe that one too?

Anonymous said...

It figures your friends would be loonies.

Anonymous said...

Anon, I know that irony is completely lost on you (and you may even have to look up its definition), but that is the most ironic statement I've read yet on this site. Congrats.

Anonymous said...

Where you open with the phrase "I'm not an economic historian" you should have left it at that.

This is complete tripe, and to put this as the history of Argentina and its woes down to only a few policies by one president a century ago is just plain myopic stupidity. Then trying to compare two different nation states with completely different histories is an equally bad crime.

Peter said...

Argentina's demise is not the failings of "one president a century ago", but that of an effort at central state control.

Try to back up your biased opinion with some facts.

Carla said...

I am not sure I agree. Argentina may not be on of the richest countries in the world today but they still have some of the best social services in Latin America. May be that is the resemblance with the US. I was in Argentina a few months ago and I got this Buenos Aires temporary rent in the neighbourhood of Villa Crespo, which is neiher one of the expensive one nor one of the poor ones. There were many hospitals, schools and community centers, all in greaat state. They really have a good public system!