Wednesday, March 31, 2010

The danger of American Peronism

Here is a short editorial from the Washington Examiner titled "United States of Argentina." I reprint it because it does a good job of comparing the worst of what is going on in the US with what those same policies did to Argentina. The parallels between Obamanomics and Peronism are chilling.

I know a lot about Argentina, having lived there for four years in the late 1970s. I've been following the economy closely ever since, and have traveled there extensively. This article does not exaggerate in the least how much Argentina has suffered from Big Government.

I believe strongly that the US electorate does not want to follow in Argentina's footsteps, even though our current ruling class apparently does. This is going to be the central issue in the upcoming November elections. If we say "NO" to American Peronism, as I think we will, our future will brighten considerably.

When White House Chief of Staff Rahm Emanuel last year advised "never waste a good crisis," he likely was thinking ahead to President Obama's economic stimulus program and health care plan. After swelling the federal deficit by passing the stimulus at a cost of nearly $1 trillion, Democrats in Congress signed off on Obamacare, with a price tag, according to Rep. Paul Ryan, R-Wis., of $2.3 trillion in its first decade alone. With federal spending exploding at such a rate, it's no wonder that Moody's Investor Service recently warned that it would downgrade the U.S. government's credit rating if it concludes "the government was unable and/or unwilling to quickly reverse the deterioration it has incurred."

What the United States government will do in the future may be in question, but we need not look far to find past examples of countries unwilling to get their finances in order. Consider Argentina. In 1914, it was one of the wealthiest countries in the world, and its living standard exceeded that of Western Europe until the late 1950s. Then President Juan Peron squandered his nation's prosperity by introducing a host of redistributionist economic and regulatory policies, nationalizing utilities and foreign investments, and pumping up the national debt. What followed was three decades of political instability, growing dependency, and economic stagnation.

There was a brief period of privatization and booming foreign investment in what the American Enterprise Institute's Mark Falcoff called Argentina's "go go" 1990s. But that was negated by the return of political leaders espousing Peronist principles who created a downward economic spiral by breaking contracts with foreign utility companies that had invested heavily in Argentina. Today, the country has lost its international credit standing and an estimated 10 percent of the population has moved abroad to escape the stifling taxes, regulation and inefficiency. To make matters worse, President Cristina Kirchner recently attracted attention for firing the president of the country's central bank. His sin was refusing to go along with her inflationary spending policies (Argentina's inflation is 17 percent) and challenging her demand that he hand over $6.6 billion in bank reserves.

Besides sending federal spending skyrocketing, Obama has, like so many of the politicians who ruined Argentina, dramatically increased government regulation of business, nationalized major sectors of the economy, and imposed a lengthy list of tax increases. America today is no more exempt from economic reality than Argentina was in years past. Make no mistake, these actions will eventually drain the life from this nation's economic vitality, just as they did in Argentina.
 HT: Glenn Reynolds


brodero said...

Isn't it a bit of stretch to compare Argentina to the United States....Argentina's CDS trade
( i believe) at 963 and the United
States is at 42....Lehman before it
went down was in the 700's....Campbell Soup is at 38.....

Benjamin Cole said...

I take "Obama as Peron" about as seriously as I took the "Bush as Mussolini" rants.

Our financial system collapsed on the Bush Watch, while we were in two open-ended wars.

I think even Obama will do better than that.

Our nation's addiction to federal debt is a problem.

brodero said...

Italy is 113...Mexico is 115....even Russia is 242....we have a
ways to go to become Argentina as much as I love Rio.....

Unknown said...

the problem is not our "ruling class" - its the electorate who wants high spending/benefits (massive military, social security, infrastructure) and low taxes at the same time. the solution to our fiscal problems is pretty simple - entitlement reform (later retirement age etc) + deep cuts in the military + higher taxes on wealthy + a broad based VAT. Our "socialist" neighbors to the north had a huge structural debt problem but then accepted a mix of higher taxes and lower spending to solve the problem.

you can complain about spending all you want - but until you put a credible plan about what and how we should cut - it's just a anti-government rant. tell us what you want to cut. and if it does not include social security, medicare and defense - you are living in a fantasy land.

W.E. Heasley said...

Mr. Grannis:

The comparison is valid. Peronism and progressivism are very similar. Peronism and Obamanomics are very similar.

Its always a good idea to know that economic history did not begin with FDR as progressives would like you to believe.

Speaking of similarities in economic history, the fourth paragraph of W.G. Sumner’s 1883 essay The Forgotten Man is eerily similar to today’s environment. Paragraph reprinted below:

"No doubt one great reason for the phenomenon which I bring to your attention is the passion for reflection and generalization which marks our period. Since the printing press has come into such wide use, we have all been encouraged to philosophize about things in a way which was unknown to our ancestors. They lived their lives out in positive contact with actual cases as they arose. They had little of this analysis, introspection, reflection and speculation which have passed into a habit and almost into a disease with us. Of all things which tempt to generalization and to philosophizing, social topics stand foremost. Each one of us gets some experience of social forces. Each one has some chance for observation of social phenomena. There is certainly no domain in which generalization is easier. There is nothing about which people dogmatize more freely. Even men of scientific training in some department in which they would not tolerate dogmatism at all will not hesitate to dogmatize in the most reckless manner about social topics. The truth is, however, that science, as yet, has won less control of social phenomena than of any other class of phenomena. The most complex and difficult subject which we now have to study is the constitution of human society, the forces which operate in it, and the laws by which they act, and we know less about these things than about any others which demand our attention. In such a state of things, over-hasty generalization is sure to be extremely mischievous. You cannot take up a magazine or newspaper without being struck by the feverish interest with which social topics and problems are discussed, and if you were a student of social science, you would find in almost all these discussions evidence, not only that the essential preparation for the discussion is wanting, but that the disputants do not even know that there is any preparation to be gained. Consequently we are bewildered by contradictory dogmatizing. We find in all these discussions only the application of pet notions and the clashing of contradictory “views.” Remedies are confidently proposed for which there is no guarantee offered except that the person who prescribes the remedy says that he is sure it will work. We hear constantly of “reform,” and the reformers turn out to be people who do not like things as they are and wish that they could be made nicer. We hear a great many exhortations to make progress from people who do not know in what direction they want to go. Consequently social reform is the most barren and tiresome subject of discussion amongst us, except esthetics."

Benjamin Cole said...

US output per worker hour has about tripled since 1977.

This is not a presciption for ruin, whether Bush or Obama is president.

Except for our house-of-cards financial system, we are getting more productive all the time. Many social ills, such a crime, are actually better today than at any time since the 1960s.

I do agree with Lorien--if you want to balance the federal budget, you gotta look at hard at deep cuts in the sacred cows.

I will say it out loud: Higher retirement ages for Social Security, a military cut in half (dollar-wise, not in real power);
eliminate the Dep't of Education, eliminate the USDA. There is more, but you get the drift.

If we want to go to war, then use Milton Friedman's progressive consumption tax to fund the war; do not burden later generations with debt or punish productive enterprises and people.

Of course, I am just spitting at the moon, with these suggestions.

brodero said...

I agree ... Oklahoma,Kentucky,
Mississippi,South Carolina,and Alabama demand a stop to profigate
federal spending but get a lot more federal dollars than they pay...there is an inherent hypocrisy .....

Public Library said...

The sooner you start calling for Palin the quicker we can capitulate this country and start anew.

The last time we hired a below average IQ we ended up in 2 wars and a financial crisis. Good luck with that.

Benjamin Cole said...


That is the Red State Socialist Empire you are talking about, the bulwark of the Republican Party.

They will never, ever balance the budget. They can't--rural areas survive on the constant infusion of federal dollars.

A balanced federal budget and the end of rural subsidies would mean the end of many more country towns. Whole zip codes would empty out.

When they vote federal money into their districts, they are voting for survival. Good luck ending that.

fwiw imho said...

I, too, believe the comparison is valid.
Maybe Benji and the other deniers will see the light when Obama talks about "fixing" the pension problems. I'm afraid our pensions (public and private)will be nationalized, like Argentina.

I keep watching the "N" dominoes fall:

Freddy and Fannie
Student loan program

Like the lobster in the kettle on the stove, you won't know the water's too hot until it's too late....

Scott Grannis said...

Peronism got started in Argentina back in the 1940s, and the government has been growing in size and influence ever since. US federal spending as a share of GDP was flat, averaging about 20%, from the early 1950s until 2008. Our federal government has only just begun a massive expansion, with spending on track to reach almost 30% of GDP, especially if Obamacare survives.

In short, the US is not Argentina, but Argentina is where we are headed if we don't do something to stop the growth of government.

Paul said...

Oh, Benji,

"They will never, ever balance the budget. They can't--rural areas survive on the constant infusion of federal dollars."

The Republican Congress(where all spending originates) did balance the budget in the late '90's. They spent waay too much from 2000-06, but look like an armuy of Ebeneezer Scrooge clones compared to the Pelosi/Benji's boyfriend team.

Benjamin Cole said...


I guess I am flattered that I have a reading audienc of one--you.

I am not a fan of Obama's. I voted for him as I believe the R-Party cannot balance the budget, and (for better or worse) we have a two-party system in this country. So, if I vote against the R-Party, then my choice is the D-Party.

I may just decide to "throw my vote away" and vote for Ron Paul in the next go 'round, though it would deprive you of the endless pleasure you get of razzing me.

And who did Paul vote for? Your namesake? I hope so.

Benjamin Cole said...

Also, you need to review the federal budget process.
The annual budget process starts with the President (through the OMB) proposing a budget to Congress. This becomes the basis of mark-ups, hearings etc. Congress does not have the the staff to prepare a budget of that size, a truly massive undetaking. It is handled by the executive branch.

Clinton, in fact, proposed surplus budgets. No R-Party President has proposed a balanced since in 50 years. They have earned the title "BS Republicans"--for "Borrow & Spend." Though it could stand for "Banana State Republicans."

Scott Grannis said...

Speaking of Paul, how do people feel about Paul Ryan? He's been pretty impressive of late.

Scott Grannis said...

Lorien: Canada's success is not the result of higher tax rates, it's the result of lower tax rates.

W.E. Heasley said...

Scott Grannis said...

“Speaking of Paul, how do people feel about Paul Ryan? He's been pretty impressive of late.”

Ryan scares the progressive dingle berries our of Obama. Empirical evidence (Ryan) always scares a progressive argument based on notions (Obama).

Paul said...


"And who did Paul vote for? Your namesake? I hope so."

I voted for McCain. He's the guy who always votes against the ethanol boondoggle you're always blathering about, and pinning on "Red State Socialists." In contrast, your boyfriend the faux reformer says things like, "We need to stand up to the special interests, bring Republicans and Democrats together, and pass the farm bill immediately. He said that during the 2008 campaign. I'm sure his ADM benefactors were quite pleased. Meanwhile, Benji's heart was all aflutter as he gazed at Hopey McChange's thousand-watt grin on the cover of People Magazine.

"Also, you need to review the federal budget process.."

A)I don't think so. . B)You're splitting hairs.

"Clinton, in fact, proposed surplus budgets. No R-Party President has proposed a balanced since in 50 years."

Made possible by the Gingrich Congress, the business cycle sweet spot, and the dot com/Y2K bubble.
I will never forget how the "extremist" Republicans were reviled by Clinton and the media for trying to rein in Clinton's spending. There would have been a surplus under President Dole as well, and the roof still would have caved in 2000 regardless.

Now, shall we compare the GOP Congress to the Pelosi Congress?

Benjamin Cole said...

I am a fan of Ron Paul's ever since he stood up in front of the last Republican Convention, and simply said we should not be involved in Iraq or Afghanistan--to wild cheers.

Just as Nixon went to China (and no liberal could w/o being called a pink pansy) it will take a Ron Paul to cut wasteful federal spending.

Can he do it? I hope so.

I am not sure why Paul is so obsessed with the money supply, given that M2 is flat, and we have zilch inflation.

Given that we have a globalized economy, and a global money supply "governed" by muliple bodies of varying transparency (or should I say opacity) my views on monetarism are deeply confused. Do we focus on the Fed for the same reason we look for lost keys at night under the streetlight? Because we can?

Paul said...


I'm a big Paul Ryan fan. Someone should ask Benji where's the Democrat equivalent of Ryan? Answer: There isn't one.

As Ann Coulter said recently, there are lots of bad Republicans. There are no good Democrats.

W.E. Heasley said...

Paul said...

‘Benji: "Clinton, in fact, proposed surplus budgets. No R-Party President has proposed a balanced since in 50 years.’

“Made possible by the Gingrich Congress, the business cycle sweet spot, and the dot com/Y2K bubble.

I will never forget how the "extremist" Republicans were reviled by Clinton and the media for trying to rein in Clinton's spending. There would have been a surplus under President Dole as well, and the roof still would have caved in 2000 regardless.

Now, shall we compare the GOP Congress to the Pelosi Congress?”

The question then becomes: is Benji really a screen name for Jared “the king of spin” Bernstein, the ultimate non-economist economist?

Benjamin Cole said...

I am not Jared Bernstein, just a skinny bald guy who loves finance, investing, economics, politics and military history.

Free of ideological constraints and political affiliations--and especially free of rancor--I have my views.

I like Milton Friedman--especially if the right-wing would truly embrace him.

I think tax law, regulation and culture (pro-business and work ethic, rule of law, fair courts, contract law, human rights, etc) trump almost everything else.

Sometimes I think culture trumps all. Honest people with a work ethic will get ahead, as countries or individuals.

Corrupt countries, with so-so work ethics, no respect for human rights etc inevitably collapse again and again.

Thus I think the monetarists are onto something, but far from the only thing. And contemplating thr global money supply raises many questions about the efficacy of monetary policy.

brodero said...

If Oklahoma can't step up and curtail its federal spending with
two conservative republican is the rest of country expected to???

Public Library said...

I find it ironic you are are willing to compare America to Argentina but when there is talk of America looking like Japan, your voice stands in opposition.

You are pegging the wrong country. If you want a glimpse of our future look east, not south.

Unknown said...

People get the country that deserve... good luck with your politics and politicians, we are satisfied with ours