“The failure of Argentina,” writes V.S. Naipal, “so rich, so underpopulated, is one of the mysteries of our time.”  The 2001 Nobel laureate has not been the only observer to express bewilderment regarding the failings of a country so blessed with resources and so impoverished as a nation. 

As Argentina slides into the economic abyss after defaulting on its $155-billion public debt, a brief glimpse into Argentine history reveals clear historical precedents.  As domination by the Spanish and British Empires in the Western Hemisphere began to ebb in the early 19th century, a string of independence and secessionist movements swept the southern region.  Argentina won its independence from Spain in 1810 largely by accommodating itself to British influence and interests.  (While Britain helped Argentina gain independence from Spain, this did not preclude two British invasions, the latter of which resulted in British sovereignty over the South Atlantic islands, 400 miles off the Argentine coast.)  After independence, nearly two centuries of Argentine statehood have been marked by chaos, revolt, hyperinflation, monetary instability, political assassinations, coups, and military dictatorships—only briefly interspersed with democracies, which ruled with little more aptitude than their unelected predecessors.

Geographically, Argentina has been endowed with a high percentage of arable land, vast grasslands and plains, and climates ranging from tropical forests and deserts to high alpine mountains.  Historically, the agriculturally based Argentine economy produced staple grains and cattle.  During World War II, Argentina sold beef and wheat to the Allied and Axis powers alike.  Ever on both sides of the fence, Juan Perón showed his sympathy for Hitler and Mussolini openly, only declaring war on Germany within the week of its unconditional surrender.  While Argentina undertook industrialization during the 1940’s and 50’s under Perón, the country’s wealth could not prevent its decline.  Argentina became the only country in the world to run an unprofitable state petroleum monopoly (post-privatization prices reached five dollars per gallon by 1999).  The military dictatorship of 1976-82, which overthrew the chaotic rule of Eva Perón, was launched in the name of national order but grew into an orgy of institutionalized murder and robbery.  More reflective Argentines will privately admit that the difference between their state and neighboring Chile is that, while Gen. Augusto Pinochet killed two to three thousand of his compatriots, he was a nationalist who helped stabilize and build his nation.  The military junta in Argentina, in contrast, killed 20,000 to 30,000 mostly innocent civilians.  The corruption and economic collapse that marked the junta’s rule left a fragile, heavily indebted state unprepared for the pseudo-democracy that succeeded it.

With significantly less arable land than Argentina, Chile became a major exporter of quality wines, raw minerals, salmon, and fruit for winter markets in the Northern Hemisphere.  On average, Chileans work more hours per capita than any other nation, and their state is considered the most stable investment environment in Latin America.  Even the trials of former military personnel, the election of the first socialist government since the CIA-inspired coup against Salvador Allende, and the effects of a global recession have not stopped Chile from standing on its feet rather than dropping to its knees before the International Monetary Fund.

In 1982, Argentina’s failing military dictatorship tried to rally the nation by invading the Falkland Islands, but after the arrival of the British Expeditionary Force, the military gave up virtually without a fight (with the notable exception of the Argentine air force).  Ironically, Argentines across the political and socio-economic spectrum feel victimized by the failure of their military action against an unarmed civilian populace of 2,000 largely eighth-generation Welsh sheep farmers on barren, windswept islands.  At the center of the Argentine cultural identity is the stated aim to “reclaim our sovereign national territory and raise our flag over our Malvinas Islands,” which has been a ethnically homogenous British colony for almost 200 years.  Indeed, in international forums, previous Argentine foreign-ministry officials such as Adalberto Giavarini and his predecessor, Guido DiTella, reminded their British and U.S. counterparts that “the Malvinas are ours”—while, in the same breath, requesting international financial assistance.  This psychology, which would be considered fringe or extremist elsewhere, is the foundation on which the Argentine national identity and foreign policy is based.

Raul Alfonsin’s first post-junta democratic government in 1982 could not prevent unprecedented hyperinflation brought on by both his failed economic policies and those of his predecessors, who had left Argentina internationally isolated and economically compromised.  With Argentine industry already in decline, his successor, Carlos Menem, encouraged by IMF and World Bank policies, drove the nail into the economic coffin by liquidating state industries and assets at bargain-basement prices, at times distributing state property to political allies.  The state educational system has exacerbated social decline, and university drop-out levels have reached 70 percent, multiplying the despair and cynicism of a generation devoid of professional and economic opportunity.  (The current joke is that Argentina’s largest export is Argentines, who line up for blocks outside European embassies looking for any opportunity abroad.)

The historic failings of Argentina seem to have created a national inferiority complex.  The populace would rather defend its faults than improve; all social ills are attributed to foreign interests; and xenophobia is as Argentine as the tango.  Gregory Copley’s statement about Turkey—that the bulk of the populace would rather “achieve national prestige than an improvement in living standards”—applies equally to Argentina.

Since this article was originally penned in November, Argentina has set a world record for turnovers in the presidency: five in a mere two weeks.  The now defunct administration of Fernando De la Rua, who came to power on an anti-corruption platform, quickly became embroiled in a string of scandals that could only be described as Clintonesque.  In the “Senate bribery scandal,” intelligence services under De la Rua’s personal friend Fernando Santibanes bribed opposition politicians to pass union-busting labor “reform” laws.  So many politicians from across the political map were involved that, despite media scrutiny, “one hand washed the other,” and no heads rolled.

In 2000, the IMF had granted additional loans of more than $40 billion to help Argentina avoid defaulting on its debt payments, yet the country’s Standard & Poors’ risk factor soared to 5,471 points by Christmas 2001—more than twice as high as that of Nigeria or Pakistan.  Throughout the crisis leading to De la Rua’s downfall, opposition politicians obstructed reforms, administration officials defected, and the more notorious soared back into popularity.

As default loomed in December, violent street protests erupted after the government froze accounts to prevent a run on the banks.  Massive criminal looting ensued, and police repression was ordered by De la Rua.  With economic collapse, chaos, and 28 deaths on his conscience, De la Rua resigned from the presidency.  His replacement, Adolfo Rodriguez Saa, spoke of an “orderly exit” from the peso-dollar parity that had helped destroy Argentina as an exporter.  And just after Christmas, Saa and his treasury and finance secretary, Rodolfo Frigeri, delivered the nation a gift too big for the chimney: the largest default in history—“for the people,” intoned Frigeri.

Saa’s brief rule was characterized by untenable promises to conflicting interests: freezes on wage cuts and the creation of 100,000 jobs; resumption of social services previously axed; and payment of state salaries with “Argentinos”—baseless currency bonds that a Financial Times editorial on January 27 termed “Mickey Mouse money”: “Printing money to satisfy popular desire for spending unmatched by taxation is a recipe for chaos.”

Saa disappeared within days, resigning ostensibly because of a “lack of support” within his own Perónist Party.  And while the Argentine protesters, the IMF, and international creditors prescribed a “new alternative” for leadership as the key to economic viability, the Argentine political class went forward in reverse, placing millionaire real-estate magnate and former Buenos Aires governor Eduardo Duhalde—a known associate of the Juarez narco-cartel—in the presidential office.  Duhalde had been overwhelmingly defeated in the 1999 presidential elections—even after using one million dollars from the Juarez drug cartel to buy votes.  Despite U.S. Senate records of his narco-laundering endeavors, his corrupt and incompetent provincial tenure, and his efforts to devalue the peso, Duhalde was heralded in the national and international press as “the last chance” to save Argentina. 

The handwriting is on the wall, as obvious as the graffiti in a Buenos Aires slum.  In the 2001 Global Competitiveness Report, published by Harvard University’s World Economic Forum, Argentina was ranked 53rd out of 75 countries, down there with the war-wracked nations of Colombia, the Philippines, Sri Lanka, and Indonesia.  A recent editorial by James Neilson in the English-language Buenos Aires Herald (November 8, 2001) boldly addresses the Argentine perspective about the current impasse:

Argentina has been edging nearer to . . . the knacker’s yard where “failed states” are broken up.  Some suspect it will be soon . . . The trouble is, people have been going on for decades about just how exceptionally bright they think the Argentines are, but this belief, which . . . is popular among Argentine intellectuals, has surely contributed . . . to the debacle by making too many . . . assume that the country’s plight is none of their doing, or that, seeing they are so clever, they will find it easy to wriggle out of any hole they may have fallen into while their eyes were fixed on the stars.  In any case, even if it were to be proved that Argentina really is home to an astonishing number of Ubermenschen that would be no consolation at all: the Titanic would have gone down just as fast if every single passenger had been a PhD.

The point at which failed nations should be cut loose from the umbilical cord of the international financial institutions that have enabled their chronic dysfunction must be considered with sobriety.  The nonviable nation-state differs little from the addict: every cover-up for the addiction, every injection or fix, every public excuse only prolongs the inevitable, drags others down, and compounds the fallout.  Col. David Hackworth has often counseled military leaders: “Do not reinforce failure.”  While Argentina’s default on its debt repayment may send shock waves throughout emerging markets and exacerbate the global recession, a call to “abandon ship” might prove to be the only way to prevent the rest of the world’s economy from sharing Argentina’s fate.