Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

actors, and they were demanding protectionist policies. Traditional sectors comprised of owners of
factors employed in the primary sector, on the other hand, supported free trade policies. This
distributional conflict surrounding trade policy shaped the politics of the second half of the
century.
The years that followed the Second World War were a time of an extraordinarily rapid expansion
of trade in which Argentina was not an active participant. Instead, it embarked on an ambitious
process of import-substitution industrialization that resulted in bumpy cycles of economic
expansion followed by sharp recessions. Argentina had the opportunity to return to an export-led
growth strategy, but the new political forces that emerged from the industrialization process during
the inter-war period were able to block any attempt to liberalize.
Liberalization could have been achieved gradually, thus mitigating the losses of those with vested
interests in protected activities. However, that would have required a set of political institutions
capable of enforcing intertemporal agreements between political groups. Sadly, Argentina lacked
such institutions (see Spiller and Tommasi, 2009). Instead, the dismantlement of the
import-substitution strategy came only after a substantial deterioration of economic and political
conditions. The steps that were then taken toward liberalization were abrupt and were applied as
shock policies by political groups that had political power but that did not represent a consensus of
the Argentine population. As a result, Argentina's integration into world markets proved to be
extremely costly in terms of inequality.
Our main thesis is that the interplay of economic and political forces that were spurred by
international conditions during the inter-war period trapped the country into an anti-trade
equilibrium which limited economic growth. The conditions that generated the anti-trade trap in
Argentina, however, should have also generated the same effect in other new-settler, land-rich
economies. This poses a pressing question: Was Argentina the only economy that fell into an
anti-trade trap? We argue that most economies that shared the endowment configuration of
Argentina faced a distributional conflict of similar characteristics but with different intensities and
outcomes.
The rest of the chapter is organized as follows. In Section 2, we relate our work with the existing
literature and explain why we focus on trade policy. In Section 3, we set up and solve the model. In
Section 4, we interpret the economic history of Argentina during the 20th century as seen through
the prism of our model. In Section 5, we compare Argentina with other new-settler, land-rich
economy: Australia. Finally, in Section 6, we present out conclusions.
2 Why is Trade Policy Important?
There is a vast amount of literature on the decline of Argentina during the 20th century, and a wide
variety of factors have been identified as causes of its dismal economic performance. However,
there is broad agreement in the literature that this period was marked by a severe distributional
conflict that shaped the politics and the economics of the country (see, among others,
Díaz-Alejandro, 1970; Díaz-Alejandro, 1984; Mallon and Sourrouille, 1975; O'Donnell, 1977;
Waisman, 1987; Rogowski, 1989; Gerchunoff, 1989; Taylor, 1994 and Gerchunoff and Llach,
2004).