Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

private investment) until the fiscal crisis of the early 1980’s. 2 A simple hypothesis suggested by
the data is that political instability causes lower private investment, and that this is the main
cause for Argentina’s relative decline. This is a natural complement to theories of Argentina’s
relative decline emphasizing investment. Diaz Alejandro (1970, 1988), for example, has
emphasized the difficulties in maintaining high levels of investment once the export-oriented,
market friendly regime was replaced by the more interventionist regimes that follow the great
depression. Taylor (1994) also emphasizes the role of the extremely high rates of capital
accumulation pre 1913, explaining that subsequent protectionist policies resulted in a high
relative price of imported capital goods and that this contributed to retard capital accumulation
(for evidence on the role of machinery investment in growth, see De Long and Summers, 1991).
A natural extension of this line of research is that political instability plays a similar role
interfering with private investment and contributing to Argentina’s decline. Of course then, a key
is why do these interventionist policies get implemented and why does political instability
persist.
0.3
Investment/GDP
0.25
0.2
0.15
0.1
I/GDP
0.05
0
1880 1900 1920 1940 1960 1980 2000 2020
Figure 1: Total Investment over GDP. Source Gerchunoff and Llach (1998).
2 For an alternative view of the investment performance, see Taylor (1998).