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March 18, 2013

So, How's Argentina Doing? And have We Learned?



The socialists in Argentina are at it again.  The economy which was once one of the top 10 in the world has been plagued by 75 years of socialism, defaults, and an ever fledgling currency market.

For whatever reason, Argentinians believe that the solution to their problems is more government (don't laugh, the United States and most of the first world think the same way).  Recently, Argentina nationalized its retirement system, much in the same way as the United States Social Security system and now, because of runaway inflation, they've implemented price controls on food.

In my research of Argentina, I came across (of all things) a New York Times article that explains the problem with Argentina over the years has been "protectionism, large state enterprises, and significant regulation."  An interesting line chart in the article also shows how profoundly the Argentina economy has imploded versus the rest of the civilized world.

I want to take a moment, however, to focus inward and apply those very factors to the United States.  When it comes to protectionism, this hot button topic has been around ever since NAFTA and calls for the US to trade less with China.  We should have learned from the Great Depression.  In terms of large state enterprises, I can't help but think of the government's ownership in AIG, General Motors, Chrysler, and a variety of other big banks and large insurance companies.  Not only that, but I would consider Medicare and Social Security as large state enterprises.

Finally, I want to take a moment to reflect on "significant regulation."  I find that regulation historically has also come in the form of taxes.  Can you think of a commercial transaction in the United States that is neither taxed nor regulated?

Argentina is on the verge of yet another default.  Are we learning from their mistakes or following in their footsteps?

Other Links:
How to Destroy a Rich Country
An Economic History of Argentina

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