Obama: America's Perón

I lived and worked in Argentina from 1975 to 1979, and I've been back there about every other year since. I began my economic career in 1980 with a lengthy study of the Argentine economy, and I spent lots of time understanding how and why it suffered hyperinflation for many years and why its economy has done so poorly. While I lived there, the inflation rate averaged about 7% a month, or 125% a year, as I recall. During one three-week visit in the mid-1980s, the price level doubled, and I saw supermarkets post prices on chalkboards and update them as many as two or three times a day. The only way the government could fund its enormous deficits was to order the central bank to print money so it could pay its bills—it's called an inflation tax because those who accept the funny money, which loses its value rapidly, are effectively forced to transfer some of their wealth to the government.

Aside from the ravages of inflation and periodic depressions—I recall calculating that industrial production per capita had declined almost 35% during one decade—the other thing that stands out in my memories of Argentina is seeing newspaper headlines report almost daily that the president had issued a decree: one day ordering some company to lower its prices, another day allowing another company to raise its prices, another day announcing the new price of gasoline, and yet another day declaring that all workers would receive a 10% increase in pay to compensate for the higher prices. The president spent most of his time managing the economy, and he did that by receiving an endless number of people in his office who petitioned for the right to raise prices, or who petitioned for relief from the fallout of one of his previous diktats. It was government by presidential decree, and it was the closest I hope I'll ever come to living in a socialist economy.

Argentines don't realize how bad things are because for most of the past 200 years they have lived in a country governed by caudillos, their term for a president with semi-dictatorial powers who solves everyone's problems. It's akin to Mafia Dons, only worse, and that in turn has a lot to do with Argentina's strong Italian roots. Juan Perón was the most famous example, and his influence is alive and well in the figure of Cristina Kirchner, Argentina's current president and a devout Peronist. She revels in pitting the rich against the poor, and handing out favors to unions, favored industries, and political cronies, all while living in grand style. Among the many curiosities of the Argentine economy, housewives are eligible for social security when they "retire," because after all, being a housewife is a job, isn't it? Trouble is, the government periodically runs out of money to pay for all the goodies, which is why a monthly social security check today won't buy even a month's worth of food. Legions of Argentines are dependent on and trapped by government handouts which effectively force them to live in a manner we would consider way below the poverty level. Spreading the wealth only ends up destroying a country's wealth, and Argentina is the best example of that I know.

So it is with great concern and sadness that I see a creeping Peronism happening in the U.S. economy under President Obama. Consider this latest headline: "Obama to Announce Contraception Rule ‘Accommodation’ for Religious Organizations." What business does our president have telling organizations and insurance companies how they should run their business, what kinds of healthcare policies they can offer, and whether or not they can charge for contraceptive services? This goes way beyond right-to-life issues, religious freedom, and the ObamaCare mandate, as John Cochrane so nicely explained in his WSJ article yesterday. It's all about whether we are going to have our economy and our personal decisions micro-managed in Washington. Are we ready to embrace Peronism? Do we really want bailouts that start with favored companies (e.g., General Motors) and trample the rights of bondholders? Should the government really be forcing banks to offer bailouts to homeowners who paid too much for their homes? It's a slippery slope we're on that knows no end, unless the voters rise up in protest this November. It's my fervent hope that they will.

Argentine President Cristina Kirchner is reported to have bragged that since Obama was copying many of her policies, he lent them great legitimacy. Two years ago I was on a plane in Argentina and was conversing with the fellow next to me about what was going on in the U.S. economy. I lamented that "Obama is the United States' Perón," and he replied "and what's wrong with that?" I immediately realized he was a Peronist, and he turned out to be the minister of education for the province that the Kirchners used to govern. Peronism has been the bane of Argentina's economy and its people, but it continues to thrive because it corrupts its politicians with unimaginable power and money.

I'm reminded once again of this memorable quote from Chip Mellor:

There continues to be the false premise that the problem in politics is too much money, when in fact the problem is too much government for sale ... these campaign finance laws are really treating only a symptom, not the disease. Until you get to the root cause, which is too much government, you are really not doing anything productive and in many cases you are doing harm.

Giving too much power to politicians (regardless of party affiliation) only ends up corrupting the entire process, because politicians end up selling favors, which in the end is an irresistible temptation. A tax hike here, a tax break there; higher prices here, lower prices there; a mandate here, an exemption from the mandate there. And so on, as we gradually lose our freedoms and our markets stop functioning efficiently. It's a very sad commentary on the state of the American economy and its politics. We really need to change; we really need less government, not more.

UPDATE: This is almost too good to be true. Apparently, Occupiers were paid to protest the CPAC (the Conservative Political Action Conference). This is exactly the strategy that the Kirchners have used in Argentina. If you travel to Argentina you are quite likely to run into a street protest that disrupts traffic, and the protest is almost certainly going to be some variation on the theme of how "the rich" are taking advantage of the poor. Three years ago I documented one such protest in Argentina. The parallels between Obama and the Peronists are too numerous to ignore. Protesters paid by unions and Peronist crony friends of the Kirchners have become so prevalent that the government has even come up with an official job designation for what they do: piqueteros. There are people in Argentina who actually make a living protesting against the supposed evils of capitalism. Believe it or not.

HT: Glenn Reynolds