Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

certain forms of human capital are more valuable than others, or human capital may no longer
prove to be enough to guarantee flexibility in the face of changing conditions. Given the
dominant role that land quality had played in determining economic success for millennia prior
to 1900, it surely was not obvious in that year that land quality would be insufficient to guarantee
prosperity in the 20 th century. A productive interpretation of the shocks that hit a nation not only
requires education and trust but also, it seems, a bit of luck.
Argentina’s experience also seems like a parable illustrating the value of economic openness. A
period of economic isolation following the great depression then led to sixty years of solitude,
during which the Argentine economy stagnated. The more recent period since Argentina opened
up has seen more success. These facts do not prove that some temporary protection is always bad
or that openness needs to be imposed by shock therapy, but they do illustrate the costs that
economic isolation can have, not least because isolation seems, at least in Argentina’s case, to be
linked with slow technological growth and political problems.
In 1900, Argentina was not just prosperous, it also seemed to have a stable political system that
protected property rights and encouraged long run growth. Over the next thirty years, the country
would embrace universal male suffrage and the secret ballot and move towards a more
egalitarian state, like much of Europe. Until 1929, Argentina’s political institutions seemed
strong, but the military coup during that year eliminated the appearance of stability. Since 1929,
Argentine politics has been far less stable and far more likely to put economic populism ahead of
economic growth, with seemingly adverse consequences for rich and poor alike. Successive
governments have nationalized and closed the economy. In part, this was a demand of voters
who did not trust they were getting their fair share of the “Argentine dream.” But another part
was surely the result of the particular interpretations peddled by political actors, notably Juan
Perón. Populism gradually became the law of the land. It is interesting to note that, as a growing
portion of the electorate accepted this particular populist narrative, Perónism remained attractive
offering interpretations that were often on the other end of the ideological spectrum. Indeed, the
market-oriented reforms of the 1990s were undertaken by a Perónist administration with
widespread political support, particularly amongst lower income groups. Perhaps the broader
lesson here is that, having once gained the trust of the poor, Perónists could continue to push
their own interpretations of reality unconstrained by ideology.
The lesson of the political side of Argentine history is relevant everywhere—past political
stability is no guarantee of future stability. Political institutions are impermanent and can be
uprooted, especially if the military intervenes. It is possible that national characteristics, such as
a long democratic tradition or a high level of human capital, may help protect against undesirable
political shocks, but there is always a chance of political decline.
We certainly do not expect a military coup in the U.S. or France (although France faced that
prospect as recently as 1961), but other forms of political duress remain quite possible. Political
extremism, public dysfunction and large national debts have appeared in many nations, and these