In the early 20th century, Argentina was one of
the richest countries in the world. While Great Britain’s maritime
power and its far-flung empire had propelled it to a dominant
position among the world’s industrialized nations, only the United
States challenged Argentina for the position of the world’s
second-most powerful economy.
It was blessed with abundant agriculture, vast
swaths of rich farmland laced with navigable rivers and an
accessible port system. Its level of industrialization was higher
than many European countries: railroads, automobiles and telephones
were commonplace.
In 1916, a new president was elected. Hipólito
Irigoyen had formed a party called The Radicals under the banner of
“fundamental change” with an appeal to the middle class.
Among Irigoyen’s changes: mandatory pension
insurance, mandatory health insurance, and support for low-income
housing construction to stimulate the economy. Put simply, the state
assumed economic control of a vast swath of the country’s operations
and began assessing new payroll taxes to fund its efforts.
With an increasing flow of funds into these
entitlement programs, the government’s payouts soon became overly
generous. Before long its outlays surpassed the value of the
taxpayers’ contributions. Put simply, it quickly became
under-funded, much like the United States’ Social Security and
Medicare programs.
The death knell for the Argentine economy,
however, came with the election of Juan Perón. Perón had a fascist
and corporatist upbringing; he and his charismatic wife aimed their
populist rhetoric at the nation’s rich.
This targeted group “swiftly expanded to cover
most of the propertied middle classes, who became an enemy to be
defeated and humiliated.”
Under Perón, the size of government bureaucracies
exploded through massive programs of social spending and by
encouraging the growth of labor unions.
High taxes and economic mismanagement took their
inevitable toll even after Perón had been driven from office. But
his populist rhetoric and “contempt for economic realities” lived
on. Argentina’s federal government continued to spend far beyond its
means.
Hyperinflation exploded in 1989, the final stage of a process
characterized by “industrial protectionism, redistribution of income
based on increased wages, and growing state intervention in the
economy…”
The Argentinian government’s practice of printing
money to pay off its public debts had crushed the economy. Inflation
hit 3000%, reminiscent of the Weimar Republic. Food riots were
rampant; stores were looted; the country descended into chaos.
And by 1994, Argentina’s public pensions — the
equivalent of Social Security — had imploded. The payroll tax had
increased from 5% to 26%, but it wasn’t enough. In addition,
Argentina had implemented a value-added tax (VAT), new income taxes,
a personal tax on wealth, and additional revenues based upon the
sale of public enterprises. These crushed the private sector,
further damaging the economy.
A government-controlled “privatization” effort to
rescue seniors’ pensions was attempted. But, by 2001, those funds
had also been raided by the government, the monies replaced by
Argentina’s defaulted government bonds.
By 2002, “…government fiscal irresponsibility…
induced a national economic crisis as severe as America’s Great
Depression.”
* * *
In 1902 Argentina was one of the world’s richest
countries. Little more than a hundred years later, it is
poverty-stricken, struggling to meet its debt obligations amidst a
drought.
We’ve seen this movie before. The Democrats’
populist plans can’t possibly work, because
government bankrupts
everything it touches. History teaches us that ObamaCare and
unfunded entitlement programs will be utter, complete disasters.
Today’s Democrats are guilty of more than
stupidity; they are enslaving future generations to poverty and
misery. And they will be long gone when it all implodes. They will
be as cold and dead as Juan Perón when the piper must ultimately be
paid.
References:
A tear for Argentina’s pension funds;
Inflation in Argentina;
The
United States of Argentina.
