Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

country interacted with initial conditions (for example the relatively small size of the country’s
internal market) to drive firms towards rent seeking and corruption. Slowly, the best business
was not to be productive and sell goods abroad, but rather to lobby the government for State
contracts. The Di Tella and Dubra chapter provides a glimpse of how some of these changes
were interpreted by one of the main political forces (Perónism). Thus, there is surely some truth
to the notion that global economic changes helped contribute to Argentina’s relatively slow rate
of growth during the 20 th century. However, this hypothesis begs the question as to why
Argentina did not move more quickly into other non-agricultural products. After all, every nation
was at one point dominated by agriculture. The United States was, and like Argentina remains,
an agricultural power. Yet other nations were able to transform themselves. The puzzle becomes
ever tougher because from the 1950s onwards, Argentina’s leaders where dedicated towards
pushing the country towards industrialization and development. Yet Argentina failed to evolve in
a powerhouse in either industry or the sophisticated services that have become increasingly
important in the last two decades.
Argentina’s experience has also been characterized by a failure to develop into a significant
industrial powerhouse, with little technological innovation and what appears to be relatively slow
managerial progress. While Argentina was as rich as much of Europe as late as 1950, European
countries managed to grow much more rapidly, primarily through the development of industry.
Even more remarkably, East Asian economies, such as Japan and Korea, which were far poorer
than Argentina through the 1960s, managed to dramatically pass Argentina carried on a wave of
export-led growth.
On one level, there can be no doubt that Argentina failed to follow the path of industrial exports
on which Japan, Korea and Italy became rich. Certainly, Argentina failed to export significant
industrial products and certainly, the nations that became industrial powerhouses also became
rich. But why did Argentina fail to modernize along that dimension. One view is that the
Argentina failure reflects bad politics and policies, as suggested by the second hypothesis. An
alternative is that other, more economic, forces held Argentina back.
For example, Alan Taylor (1998) has argued that Argentina’s low savings rate is responsible for
its lackluster rate of growth. Over the past fifty years, the average savings rate as percent of GDP
in Argentina was 21 percent. Germany and France averaged about 23 percent, in Austria 25
percent, and Switzerland close to 30; savings rate in Japan was about 32 percent. These
differences could account for some of the growth gap between Argentina and the rest of the
world. There was also a significant difference in human capital accumulation levels as well.
According to the Barro-Lee data, average years of schooling in Argentina increased from slightly
under five years in 1960 to 6.6 years in 1980 and 8.5 years in 2000. The “advanced country”
average in their data set is more than seven years in 1960, 8.86 years in 1980 and 9.8 years in
2000. Japan had 6.8 years of schooling in 1960, when it was still considerably poorer than
Argentina, 8.2 years in 1980 and 9.7 years in 2000. Given the strong connection between growth
and human and physical capital accumulation (Mankiw, Romer and Weil, 1992, Barro, 1993),
perhaps Argentina’s lackluster growth performance isn’t that surprising.
Moreover, there is evidence to suggest that technological innovation has also been fairly slow in
Argentina during the last forty years. For example, the United National Industrial Development