Argentina
In contrast, for Argentina, stages and patterns theories
illuminate relatively little economic history,
whereas the dependence revolution and neoclassical
counterrevolution theories together offer important
insights.
Stages of Growth The history of Argentina
poses a strong challenge to the linear-stages approach.
Rostow defined takeoff as “the interval
when the old blocks and resistances to steady
growth are finally overcome. . . . Growth becomes its
normal condition.” In 1870, Argentina ranked
eleventh in the world in per capita income (ahead of
Germany); today, it is not even in the top 50. Although
Rostow said that in determining a country’s
stage, technology absorption, not income per inhabitant,
is what matters, he dated Argentina’s preconditions
for takeoff as an extended period before 1914
and concluded that takeoff “in some sense” began in
the First World War, but “in the mid 1930s . . . a sustained
take-off was inaugurated, which by and large
can now [1960] be judged to have been successful,”
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concluding that “in Latin America the take-off has
been completed in two major cases (Mexico and Argentina).”
Rostow attributes the fact that preconditions
were there for some time before takeoff to excessive
import of foreign capital over too long a
period without increasing domestic savings. (But
South Korea was also a heavy foreign borrower until
recently.) Argentina certainly met Rostow’s criterion
of developing manufacturing sectors at a rapid
rate.
But now let’s look at what happened in Argentina
since Rostow put the country forward as an example.
According to World Bank data, Argentina had a
negative growth rate throughout the 1965–1990 period,
and in the 1980s, domestic investment shrank at
a -8.3% rate, falling back well below Rostow’s
threshold takeoff investment levels. Although Argentina
grew at 3.6% in 1990–2001, it defaulted on its
debt in 2002, and the economy shrank 11%, followed
by a modest recovery. Argentina’s share of investment
in GDP from 2000 to 2007 has been 17%, well
under half that of South Korea. Like many other
Latin American and African countries in the 1970s
and 1980s, Argentina demonstrated that development
progress is not irreversible and that sustained
growth can come to an end.
Structural Patterns Argentina did exhibit many
of the usual structural patterns of development as
agricultural productivity rose, industrial employment
grew (albeit slowly), urbanization took place,
fertility fell, and so on. But the fact that many structural
regularities of development were observed
even as living standards in the country stagnated illustrates
some of the shortcomings of relying too
much on selected pieces of data without the assistance
of guiding theory on how the parts fit together.
Dependence Revolution In contrast to South
Korea, the case of Argentina offers some vindication
for dependence theories in that the country
relied to a large extent on exporting primary
goods, and the real prices of these goods fell compared
to imports. Multinational corporations
played a large role, and Argentina was unable to
create its own viable manufacturing export industries,
ultimately having to submit to stringent
structural-adjustment programs, sell state industries
to foreign companies, and other constraints.
Dependence theorists can claim with some justification
that Argentina’s conditioned development
fell victim to developed-country economic interests,
especially those of British and American corporations.
Neoclassical Counterrevolution But Argentina
also offers some vindication for neoclassical counterrevolution
theory in that faulty interventionist
restrictions, inefficient state enterprise, bias
against production for exports, and unnecessary
red tape ended up hurting industry and entrepreneurship.
Government policy consistently seemed
to support privileged interests rather than broad
goals of development, and government failure
was usually worse than market failure in the country.
In the mid-1990s, a large-scale liberalization
and privatization program seemed to be beginning
to reinvigorate growth in Argentina. Unfortunately,
by 2002, four years of recession culminated
in economic implosion as the economy collapsed
under the weight of rising internal fiscal and external
trade deficits, caused in part by the linking
of the peso to a strong U.S. dollar. Dependence
theorists claimed vindication. The recovery and
relatively rapid growth from 2004 to 2008 (before
the recession that hit the country after the global
crisis), despite Argentina’s debt default, showed
that single explanations for development success
and failure are rarely adequate.