Loco-motion: Looking back on the first year of Argentina’s eccentric president

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What happened to Argentina's once-stellar economy

As economist Simon Kuznets said, there are four types of economies: developed, developing, Japan, and Argentina. Long before his time, a century and a half ago, Argentina was one of the world's richest nations, with a GDP per capita on par with those of Great Britain and the U.S. and exceeding that of Spain, its former metropolis. However, Argentina soon slipped from the cohort of developed nations in a dramatic turn that made Kuznets single it out as a separate type of economy.

Much of its decline is attributed to the political instability that began in 1930, when a military junta took power, ending seven decades of civilian constitutional rule. Between 1930 and 1981, the country survived seven military coups.

Juan Domingo Perón, a former military officer who was elected president three times, had a hand in reverting the country’s economic achievements. His left-populist movement, known as Peronism, had the support of labor unions, the poor, and the working class. The Peronists won 10 of the 14 presidential elections in which they participated. Trying to protect workers from foreign competition, they advocated for economic isolationism and restricted international trade, which had been a key to Argentina's wealth. As a result, Argentina's share in global exports declined year after year.

Meanwhile, Argentina's main domestic problems were uncontrolled government spending and expensive social programs that the country could not afford. Decades of energy and transportation subsidies aimed at protecting the poor caused all sorts of economic distortions and drove the country into bankruptcy. Paradoxically, the subsidies imposed by leftist politicians only fueled inflation, hitting their main beneficiaries — the poor. The government had to print money for new subsidies, thereby deepening the vicious circle of inflation.