With the results of the primaries of the August 11 presidential election in Argentina local time, the right-wing current president, Markley, unexpectedly lost to the “Family Front” composed of former left-wing President Christina and his recommended Alberto Fernandez, Fernandez It is far ahead of Markley with a 15% higher vote. As a result, the financial market was in strong turmoil. The stock market, the foreign exchange market, and the bond market plummeted, making Argentina, which has not been able to get out of the economic crisis, worse. It seems that the history of the Argentine crisis reappeared 20 years ago.
Argentina was originally a country with a relatively developed Latin American economy. In 1913, it was ranked among the top ten countries in the world. Since then, it has experienced several major crises, such as the crisis brought about by the Great Depression of the World War in 1929-1930, the debt crisis that swept through the entire Latin American region in 1982, and the Argentine crisis in the late 20th and early 21st centuries. Among them, a serious economic crisis broke out at the end of 2001. There are many similarities with the collapse of the financial market. The chain reaction of the political crisis and the social crisis triggered by the financial crisis has been frightening. The development path of Argentina, which has experienced a century of ups and downs, is worth thinking about.
Financial market turmoil has deep-seated reasons
Although on the surface, the results of the primaries in Argentina this election and the financial market collapse that occurred were not only related to people’s disappointment with the policy, but also the result of the crazy selling of investors due to fear of future expectations, but why Argentina is in crisis hair? The underlying reasons are mainly as follows:
On the one hand is an external factor. In these several major crises affecting Argentina, the international financial institutions (mainly the International Monetary Fund) led by the United States and the United States, or the American factor, are the main external sources of the crisis in Argentina. In fact, whether it is the Great Depression, the debt crisis, the Argentine crisis at the beginning of the new century, or even the collapse of the financial market, we can see the shadow of the US-induced crisis. As far as this financial market crash is concerned, the 2018 US interest rate hike policy has actually laid the groundwork for this collapse.
The other is the internal reason. External factors are conditions, and internal factors are fundamental. Argentina’s repeated mistakes are the determining factors of its endogenous nature. It mainly includes: First, the economic structure of Argentina’s fragility and dependent type. Although Argentina began its early industrialization process as early as the 1870s, and then experienced import substitution industrialization, the development of Argentina’s modernization has long been based on the export of primary products dominated by agriculture and animal husbandry, and the profits of the export sector. Not transmitted to the non-export sector, making the Argentine economy the world’s best in 1913, but the economic structure is not
A fundamental change has been a country of agriculture and animal husbandry. Therefore, the characteristics of this economic structure naturally cannot be rid of dependence on external markets, technology and capital, and at the same time it is affected by fluctuations in external market demand, and its economic vulnerability is self-evident.
Second, the “pendulum effect” of politics and economy has long restricted the development of Argentina. In Latin American countries, there are widespread political and economic “pendulum phenomena”, of which Argentina is more typical. As far as politics is concerned, it is reflected in the fact that the two parties are taking turns to govern. In economic terms, the leftist parties tend to implement a nationalist policy, which is embodied in emphasizing state intervention, nationalization, and financial liberalization. The rightist party advocates pro-market, emphasizes the dominant role of the market, and opposes state intervention. It advocates privatization, opposes nationalization, advocates financial liberalization, and emphasizes the implementation of a free floating exchange rate system.
Especially since the 1990s, when Argentina introduced neoliberal reforms, the political and economic “pendulum phenomenon” has gone to the extreme, often from one extreme to the other, and every time the pendulum swings back is the internal and external factors. In the case of persecution, I have to turn.
Third, there is a lack of development path suitable for the country. Argentina’s “pendulum phenomenon” precisely reflects the irrational side of its political ecology and economic activities. Judging from the two Latin American countries (Chile and Argentina) that were adopted by the United States and the International Monetary Fund as models of neoliberal reforms in the past, Chile, although the initial stage of reform, and Argentina, implemented the new prescriptions based on the Washington Consensus. Liberal reform, but with the deepening of the reform, Chile is constantly making policy adjustments according to national conditions, promoting the continued development of the Chilean economy and becoming the only Latin American country that crosses the “middle income trap”. The contrast between the two countries undoubtedly reflects Argentina’s serious shortcomings in this regard.
Enlightenment from the development experience of Argentina
The experience of Argentina has left many lessons worth learning in developing countries including China. In general, we need to deal with the following aspects: First, the relationship between the government and the market. A prominent problem reflected in several crises in Argentina is that either the leftist government overemphasizes the role of the state, or the rightist government overemphasizes the role of the market, weakening or abandoning state intervention. Practice has proved that Argentina, whether it is simply stressed which one, ended in failure. Therefore, experience shows that both the government and the market are important in the governance of the national economy, and the two can interact and cannot be neglected.
The second is the relationship between openness and reform. Openness is the means of development, and development is the fundamental purpose of openness. The financial open policy that Argentina had previously implemented has placed too much hope of national development on foreign investment, which not only makes the country’s foreign debts high, but also easily triggers a crisis in the case of fiscal deficits.
The third is the relationship between long-term and short-term. Argentina has long lacked a sustainable economic policy, and its economic policies often change with the changes of political ecology. Especially after the debt crisis in the 1980s, the leftist rightists took turns to debut, and the policies were contrary. The two factions did not consider policy choices from the long-term perspective of Argentina’s national conditions to suit its development, but completely denied the other’s governance concepts and policies in a short-sighted and irrational manner. The long-term “pendulum phenomenon” has led to inconsistent policy measures of various governments, and the short-term interests and long-term goals are mutually constrained. As a result, Argentina has been in a recession for a long time and is paralyzed in the “middle income trap.”