Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

far. Argentina's differential population growth before the Depression was due to its
immigration rate, and there's no reason why Argentina would still receive immigrants on such
a scale thereafter (actually, it did so at a much more modest pace). Also, while it is true that
Argentina's population grew more than that of the U.S. and Western Europe in 1930-2000
(213% compared to 128% and 38% respectively), it increased only slightly faster than in
Canada and Australia (196% and 194%) and more slowly than Brazil (425%) or Mexico
(481%), all of which enjoyed higher rates of economic growth.
Other peculiarities of Argentina's pre-Depression era relate to its subsequent ability to
accumulate capital. First, Argentina imported most of its capital goods, so its investment rate
depended more than in other rich countries on balance of payments concerns, such as the
evolution of the terms of trade or the ability of exportable production to continue its
expansion. As stressed by Díaz Alejandro (1975) and Taylor (1998), the protectionist policy
response to the negative demand shocks starting in the Depression only made matters worse
as it increased the price of capital goods even more than what they were already rising −in
terms of Argentina's export basket− in the international markets.
Second, as explained in section 3, the capital intensive sector (manufacturing) was importcompeting.
Did this place a limit on capital accumulation in manufacturing and, thus, on
economic growth? Probably: Argentina's manufacturing sector of the 1920s had to compete
for labor that was well paid in the very productive agricultural industries, but had to do so
with a limited level of productivity, a combination implying that under free-trade Argentina'a
manufactures were less profitable than in a low-wage, low productivity country (say, Brazil)
or in a high-wage, high-productivity country (say, the U.S.). As stressed in the previous
section, foreign and local investment in manufacturing was quite vibrant for some time during
the 1920s, in part an adjustment to better terms of trade for manufactures. But a longer term
question lingered: as long as manufacturing remained at a comparative disadvantage and thus
hardly competitive in international markets, would investment flow there at a rate compatible
with rapid economic growth? Public policies could have helped more through protection 23 ,
but that would have made investment in exports less profitable and damaged the capacity to
import capital goods, while lasting only until the limits of the internal market were reached −
more or less what happened during the decades of import substituting industrialization.
Argentina's capital accumulation in manufactures was then in something of a conundrum:
with prosperous external demand, foreign exchange would be available for capital goods
imports but the price incentives would be lacking for their investment; with feeble demand,
the price incentives would be there −though limited to the national market− but the foreign
exchange wouldn't.
5. Conclusions
Argentina's economic experience was quite exceptional even before the country's decay to
middle-class starting in the 1930s. In particular, the technological windfall of railways was
nothing short of revolutionary for the Pampas, one of the most ample stretches of land in the
world capable of producing cereals − ie., bulky products which could only take off in
23 That's exactly the point by Di Tella and Zymelman (1967) in their indictment of the Radical administrations of
the 1920s.