Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

Maddison's "Western Offshoots" by less than 20% −and sometimes by as little as 7%− between
1905 and 1929. Massive population growth and economic success combined to multiply by 4
Argentina's share in world GDP between 1870 and 1930. 1
Disheartening and disappointing as Argentina's post-1930 performance was, does it really
involve an economic puzzle? Is there any reason to believe that a country that has reached the
league of the rich should remain there, or even approach the richest among the rich? The
question has an empirical and a theoretical side to it. Let's formulate the empirical question with
some precision. For example: are there many other examples of countries which, after reaching
at some point at least 80% of the per capita GDP of the twelve originally rich 2 , subsequently fell
to a level consistently below 50%, as Argentina did? The list is short, and has the peculiarity that
all five cases hovered around 40% of that sample by the year 2000: Uruguay (around 100% in
the 1870s), plus four oil exporters: Venezuela (more than 100% in 1945-1960), Saudi Arabia
(90% during the first oil shock), Kuwait and Qatar (both of them, more than 400% in the early
1950s). Three of the five are tiny, with a population less than a tenth of Argentina's. In all five
cases, the high per capita GDP at their summit is definitely due to an exceptionally high
availability of natural resources per person, including not only the oil exporters but also the
213,000 Uruguayans who held, each, an average of 24 cattle and 12 sheep in 1860 3 .
Was that also the case for Argentina? In the next section we discuss that possibility as part of one
of the hypotheses for Argentina's decline, namely, that Argentina's per capita GDP during the
initial decades of the 20th century was a misleading indicator of its real wealth − in particular,
that GDP was more related to land and less to physical and human capital than was the case for
countries of similar income per head. We leave the full discussion of that hypothesis for the
following section and for some of the articles in this volume, but it is interesting to pursue at this
point the theoretical aspects of economic growth as applied to countries in which the stream of
income springs, to a larger extent than the norm, from natural resources. Is there, in the
neoclassical theory of economic growth, anything special going on in countries with a high ratio
of natural resources to population?
If we define modern economies as those where accumulation of capital −physical and human−
and technology account for all of the growth in per capita GDP, a corollary of Solow-type
models is the prediction of "conditional convergence": countries with lower per capita stocks of
human and physical capital are poorer; other things equal, in countries with lower stocks of both
types of capital marginal productivity is higher, due to decreasing returns; then, if "institutional
incentives" and other traits −such as propensities to save− are similar, poorer countries should
grow faster than richer ones 4 . What are the implications of neoclassical growth theory for
1 All data from Maddison, in http://www.ggdc.net/maddison/, retrieved March 2010.
2 Ie., the richest in 1900, a group including England, France, Germany, their economic hinterland (Denmark,
Belgium, Netherlands, Switzerland, Austria) plus the four "Western Offshoots" (USA, Canada, Australia and New
Zealand). The thirteenth was Argentina (77,7% of the richest twelve), and, after a gap, Uruguay (62,5%), Sweden
(62,3%) and Chile (61,7%) followed.
3 Uruguayan population in 1860: extrapolation from Maddison's data for 1850 and 1870 using a constant rate of
growth. Cattle and sheep from Gran Enciclopedia Rialp, 1991.
4 In addition, there could be some "technological catch up" as improving the backward technology of poorer
countries requires the cheap expedient (of copy-pasting foreign techniques, rather than the more expensive process
of developing new technologies.