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[LINK] “Argentina: The Myth of a Century of Decline”

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Eugenio Diaz-Bonilla, writing for Economonitor, makes a superficially persuasive case that Argentina’s period of pronounced economic decline relative to the United States and Europe isn’t a century old. Argentina, he suggests, declined relative to the north after the Second World War like Australia, unlike Australia starting from a relatively lower point. The big economic shock came much later.

Below I will try to show that instead of a “century decline,” what characterizes Argentina’s economic evolution as compared to other countries is that it suffered a deep economic collapse from the mid 1970s to the end of the 1980s (in what follows, data is from the Maddison Project. http://www.ggdc.net/maddison/maddison-project/data.htm).

This structural break in the evolution of the GDP per capita (GDPpc) in Argentina can indeed be attributed to internal conditions in that country. But other than that, there is not much difference in the evolution of Argentina, when compared to, for instance, Australia, or Uruguay, two countries mentioned by The Economist as either not having suffered the “hundred year decline” and/or to have followed better economic and institutional policies than Argentina. It is true that other countries such as Korea or Spain, which had far lower GDPpc than Argentina during great part of the 20th Century overtook Argentina by a large margin since the 1970s. But it is also true that if Argentina had avoided the sharp drop in the 1970s and maintained the share of the US GDPpc that prevailed before that structural break, the country would have had now an income per capita above all countries in LAC and many European countries such as Portugal, the Czech Republic, Hungary, and Poland. And if it had maintained the lineal trend growth from the 1960s to the mid 1970s it would be now at about the level of New Zealand or Spain, according to the data of the Maddison Project. In other words, if Argentina had avoided the real tragedy that started in the mid 1970s, the country would be now a developed country.

The cause? Totalitarianism and its aftermath.

The decline started with the fracture of the society after the death of Perón in 1974, but it was the subsequent military coup of March 1976, which aiming at stamping out the Peronist Party and its followers (a “final solution” for Argentina, if you will), killed and forced into exile a significant number of Argentines (which among other things hollowed the previously relatively well-built basis of scientists mainly in public universities), started to dismantle the manufacturing base that was supposed to give the Peronist Party its loyal labor base, generated the debt explosion that led to the 1980s debt crisis, and spent a large amount of fiscal resources into different military adventures (including the misguided invasion of the Malvinas, which generated further loses of lives as well). The Radical Party, with President Alfonsín, won the elections in 1983 and did a very good job at restoring the democratic institutions (including the unprecedented trials and imprisonment of the military leaders responsible for the tragedy of the 1970s. But the Administration was hobbled by the very weakened and highly indebted economy left by the previous dictatorial government, had to contend with a restive military (which attempted several coup d’etats in the 1980s and 1990s, until the putschists were finally defeated during the Menem Administration), was under the pressure of a labor force that was expecting improvements in its living conditions after a decade of wage compression under the military, and suffered the collapse of commodity prices in mid-1980s.

This is an interesting rephrasing of Argentina’s economic situation, taking it out of a Latin American context and putting it into a post-totalitarian context. Spain and Portugal, after their democratic transitions in the mid-1970s, went through a decade-long period of decline relative to northwestern Europe, as did central Europe in the decade after 1989. Recovery came only relatively slowly, and full convergence still far from complete.

Is Diaz-Bonilla correct in suggesting that Argentina is going to remain in the convergence club and retake its lost position towards the bottom of First World income rankings? Is his analysis correct at all, or enough? I wonder.

Written by Randy McDonald

April 22, 2014 at 11:05 pm

[LINK] Three links on the troubled future of the Puerto Rico economy

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  • Reuters’ Luciana Lopez described Puerto Rico’s entrenched underground economy. Unregulated and–critically–not paying taxes at a time when the Puerto Rican government is terribly short of money, the question of how to deal with this is key.
  • From the western mountain town of Lares to the capital San Juan, officials are wrestling with how to bring the underground economy out of the shadows and onto the tax rolls without creating such an onerous financial burden that thousands of small and medium businesses can’t survive.

    More than a quarter of the island’s economy is informal, some studies say, from large companies evading taxes to individuals selling items for cash at roadside stands. But estimates vary widely because the activity can be so hard to track.

    While not new, the problem has become urgent of late. The government desperately needs to find new revenue to bolster a budget full of holes and turn around an economy now eight years in recession. It is scrambling to avoid a painful debt restructuring some view as almost inevitable.

    Last month’s $3.5 billion bond sale bought the island some time, but precious little else, with fundamental worries about its shrinking economy still unsolved.

    [. . .]

    The divisions between the government and its people leave policymakers in a damned-if-you-do, damned-if-you-don’t position.

    “This is the conundrum for the island,” said Emily Raimes, lead analyst on Puerto Rico for Moody’s Investors Service. “Actions that they can take to help their finances may very well be actions that hurt the economy.”

  • La Prensa, meanwhile, shared a report suggesting that the Puerto Rican government wants to launch the island as a platform for Spanish investment in the United States and broader Latin America.
  • Puerto Rico’s government is pushing a strategic plan to transform the Caribbean island into an “investment bridge” from Spain to the United States and Latin America and is offering fiscal and legal incentives to Spanish investors, Puerto Rican Secretary of Economic Development and Commerce Alberto Baco said in an interview with Efe.

    The new administration of Gov. Alejandro Padilla intends to reorient the Puerto Rican economy toward foreign services, mainly in the banking sector, securities, engineering and computer technology, Baco said.

    The aim is to internationalize the island’s economy, which is fundamentally based on the manufacturing sector, and create a platform for foreign firms wanting to export their services to North America and for local companies who wish to break into the European market.

    Baco, on a visit to Madrid to meet with Spanish businessmen, said that Puerto Rico, which is a U.S. commonwealth but maintains its fiscal independence, will invest up to $300 million in the tourist industry, “specializing in sports, culture and adventure” tourism.

    The opening in May of the new Air Europa route between Madrid and San Juan could also increase tourist traffic by some 200 percent, Baco said, adding that Iberia could return to the Puerto Rican market.

  • The Huffington Post‘s Adrian Brito notes that statehood in the United States, by removing many of Puerto Rico’s economic advantages as a self-governing commonwealth, would be an economic catastrophe for the island.
  • According to a new report published by the U.S General Accountability Office (GAO), out of the estimated $5.2 billion in new federal spending Puerto Rico would receive, only a range of $2-4 billion would come back in new revenues for the federal government. However, statehood would mean that every day Puerto Ricans would be saddled with $2.3 billion in new federal taxes that they do not pay today.

    The GAO report addressed the adverse impact of statehood on the Island’s finances, stating:

    … [a]s a result of statehood, changes to Puerto Rico government spending and revenue could ultimately affect the government’s efforts to maintain a balanced budged… statehood could [therefore] result in reduced Puerto Rico tax revenue. If Puerto Rico’s government wished to maintain pre-statehood tax burdens for individual and corporations, it would need to lower its tax rates, which could reduce tax revenues.

    Given Puerto Rico’s recent financial struggles and the government of the Commonwealth’s tough economic reform efforts, cutting almost half of the Island’s budget would be disastrous. GAO also notes that Puerto Rico’s current triple tax-exempt bonds would no longer be exempt from federal taxes, which would make it much harder for the Island to reduce its fiscal woes.

    U.S. manufacturers in Puerto Rico, in particular pharmaceutical companies, would also face a higher tax-burden under statehood and the U.S GAO report confirms that many of them would leave. This would put in risk more than 80,000 jobs, plus tens of thousands more government jobs that would be at stake if the local government loses billions in tax revenues under statehood.

    Written by Randy McDonald

    April 22, 2014 at 7:43 pm

    [BLOG] Some Thursday links

    • Andart’s Anders Sandberg links to an essay he co-wrote about human longevity. The lessons of centenarians are important, but they also indicate the problems with extended: the damage of ageing has to be slowed down or even repaired, somehow.
    • BlogTO has two photoposts about alternate subways in Toronto, one showing a 1913 proposal for a downtown route, the other examining the Lower Queen Station that could have anchored a Queen Street subway.
    • Crooked Timber and Lawyers, Guns and Money both go after Conor Friedersdorf’s article that doesn’t identify bigoted behaviour as bigoted.
    • The Dragon’s Gaze notes that the results of a search for exomoons, while not turning any up, has produced interesting data on planetary densities.
    • Eastern Approaches, looking to the examples of Arab Spring states, argues that Ukraine will have trouble getting back state assets appropriated by the Yanukovich elite.
    • Geocurrents wonders whether mealtimes in Spain are product of geography and climate.
    • Language Hat notes the disappearance of Yiddish as a major American language.
    • Marginal Revolution links to a paper asking whether too many cultural similarities can lead to interstate war and notes Ukraine’s weak post-Soviet economic growth.
    • The Planetary Society Blog features a Marc Rayman post talking about the Dawn probe’s maneuvering towards dwarf planet Ceres.
    • Steve Munro breaks down Toronto’s transit history into three different phases.
    • Torontoist goes into more detail about the school trustees who would like a crackdown on nudity at Pride.
    • Towleroad examines Liz Dahl, the second Russia Today anchor to quit on a live broadcast over Crimea.

    [BLOG] Some Friday links

    • Centauri Dreams reacts to yesterday’s announcement that Kepler had found another 715 planets. What an embarrassment of riches!
    • Crooked Timber’s Chris Bertram mourns the freer blogging culture of old, before things because set and professionalized.
    • A Fistful of Euros’ Edward Hugh argues that, with a shrinking population and stagnant incomes, Japan-style deflation is inevitable in Spain.
    • At Geocurrents, Claire Negiar summarizes the simmering separatism of the southern Senegalese region of Casamance.
    • Marginal Revolution’s Tyler Cowen starts a discussion about the impact of bringing extinct species like the passenger pigeon back to life.
    • The New APPS Blog’s Mohan Matthen argues that an independent Scotland and the rest of the United Kingdom should maintain a currency union. (I’ve made arguments against.)
    • The Power and the Money’s Noel Maurer maps the declining power of Chavista politics at the polls in Venezuela.
    • Savage Minds has a neat interview with an ethnographer who is also a designer.
    • The Speed River Journal’s Van Waffle celebrates the avocado, with photos and recipes.
    • Torontoist links to a cool video showing the exploration of some hidden nooks of the Toronto transit system.
    • Window on Eurasia notes that, at least in terms of declared ethnic identity, Ukraine is as Ukrainian as Russia is Russians.
    • Wonkman points out that mores in cities take a while to get used to, just like the mores of non-urban areas.

    [BLOG] Some Saturday links

    • BlogTO’s Derek Flack shares pictures of Toronto in the 1970s.
    • James Bow thinks, in response to discussion at Toronto city council, that the position of head of the TTC should be put up to a general election.
    • Centauri Dreams notes the ESA’s new PLATO planet-hunter telescope, positioned at the Earth-Sun L2 point, and features a guest post from J. N. Nielsen talking of the means by which life will be dispersed.
    • City of Brass’ Aziz Poonawalla is unsurprised by the recent finding that the NYPD’s spying on Muslims was legal.
    • Discover‘s D-Brief notes a very odd pulsar.
    • The Dragon’s Tales links to a paper wondering if the products of Europa’s geysers–including signs of life?–could be sampled by spacecraft.
    • Eastern Approaches notes Ukraine’s agony.
    • Geocurrents notes, in light of Spain’s recent law granting Sephardic Jews the right to gain Spanish citizenship, the vexed question of what Sephardim are.
    • Lawyers, Guns and Money notes a study chroniclingly state-by-state startling post-1979 increases in inequality in the US. (I fear a similar study from Canada.)
    • Marginal Revolution notes that Ukraine will see the next big financial crisis.
    • The Signal notes the exceptional fragility of the ageing rewritable CDs used to store WNYC’s radio programs.
    • Torontoist noted that Doug Ford won’t be running in the next provincial election as a candidate.
    • Understanding Society’s Daniel Little argues that narrative history should seek to explain underlying patterns to be useful.
    • Window on Eurasia speculates that Kazakhstan could lead the integration of the Turkic world.

    [BLOG] Some Wednesday links

    • The Dragon’s Tales notes that, to cut costs for its Ariane 6 rocket, the European Space Agency is no longer going to try to source parts for the Ariane 6 across its member-states, insteading aiming for more efficient distribution of suppliers.
    • Geocurrents’ Asya Pereltsvaig wonders about the consequences Spain’s offer of citizenship to the descendants of Jews deported in 1492 might have. How many will take up Spain on the offer?
    • Marginal Revolution’s Tyler Cowen is not a locavore at all.
    • The Planetary Society Blog’s Emily Lakdawalla wonders, with others, just what Mercury’s unique hollows are.
    • Strange Maps chronicles the “hippie trail”, a route popular with backpackers in the 1960s and 1970s that stretched from Europe through Turkey and Afghanistan towards Southeast Asia.
    • Towleroad notes the vicious homophobia of Gambian President Yahya Jammeh.
    • Understanding Society’s Daniel Little chronicles the not-entirely unreciprocated sympathy of Karl Marx for the liberator Abraham Lincoln.
    • The Volokh Conspiracy notes that immigration is unlikely to increase the size of the American welfare state. (If anything, as European rhetoric suggests, it might decrease it.)

    [BLOG] Some Tuesday links

    • The Dragon’s Tales links to a private proposal for the ESA to launch
    • The Everyday Sociology Blog’s Peter Kaufman finds sociology and mindfulness meditation quite compatible.
    • Far Outliers takes a look at the instability of the post-Ottoman Arab kingdoms of the Middle East.
    • Joe. My. God. notes that AIDS denialists are trying to shut down YouTube commentary on their ideas by claiming copyright on videos referenced in these commentaries.
    • Marginal Revolution notes that Spain is now partaking in the European Union-wide market for health care services.
    • Personal Reflections’ Jim Belshaw observes that, perhaps contrary stereotypes, his Australian region of New England had a very large Chinese population.
    • J. Otto Pohl notes how the social geography of Accra, Ghana’s capital, has changed and not changed over time.
    • The Planetary Society Blog features a guest post from Bill Dunford talking of various missions sent to our sun.
    • The Volokh Conspiracy announces a week of posts on the position of sharia law in the United States.
    • Window on Eurasia notes that Ukrainian Orthodox (Kyiv Patriarchate) as well as Ukrainian Catholics are opposed to Russia, and quotes statistics (the high number of .ru-registered websites outside of Russia, the high Kazakh birth rate, conspiracy theories about Ukraine) which suggest things might be problematic for Russia.

    [BLOG] Some Friday links

    • The Broadside Blog’s Caitlin Kelly points writers to evidence that editing can be a harsh and thorough process: a photograph of one of her own drafts.
    • Centauri Dreams notes that a recent study of the distribution of different sorts of asteroids in the asteroid belt suggests that the planets in the early solar system were exceptionally mobile, with Jupiter’s inward migrations perhaps tossing enough icy bodies our way to give Earth oceans.
    • Discover‘s The Crux points out alleged photographic evidence of an alien base on the Moon is no such thing.
    • The Dragon’s Tales links to Stephen Hawking’s paper on black holes, which apparently argues they don’t destroy information so much as garble it.
    • The Dragon’s Gaze links to a recent study suggesting that the Alpha Centauri system is quite full of dust.
    • The Financial Times‘ World blog notes that the dustup over Oxfam and Scarlett Johansson’s involvement as spokesperson for an Israeli company making use of West Bank resources highlights Israel’s growing issues.
    • Joe. My. God. notes a recent Washington Post-ABC poll suggesting that Hillary Clinton is far and away the Democratic Party’s favourite for the 2016 presidential election.
    • Dave Brockington of Lawyers, Guns and Money takes issue with Niall Ferguson’s argument that Britain should have stayed out of the First World War.
    • Marginal Revolution notes a recent paper suggesting how Catalonia might progress to independence from Spain, in the context of shared debt.
    • Thought Catalog’s Shawn Binder writes about how homophobia can intrude even within same-sex relationships.
    • Torontoist notes a major billion-dollar development at Spadina and Front that would literally create a new neighbourhood.
    • Towleroad observes that billionaire Cecil Chao has withdrawn the dowry he offered to potential suitors of his lesbian and coupled daughter Gigi, without acknowledging her actual relationship.

    [BLOG] Some Tuesday links

    • James Bow really likes the new Hunger Games movie, Catching Fire. One thing he thinks it does very well is show people caught up in an oppressive system.
    • The Dragon’s Tales notes that the European Space Agency is facing huge cost overruns with its Ariane 6 rocket.
    • io9 shares a chart showing the top 20 metropolitan areas of the United States over time.
    • Joe. My. God. observes that seniors who have been staking out tables at a McDonald’s in New York City as a place to socialize have agreed to be more considerate.
    • Language Log’s Victor Mair comments upon a picture of a Taiwanese subway advertisement that makes use of three different scripts.
    • Marginal Revolution’s Tyler Cowen likes Will Wilkinson’s argument about how liberalism is ultimately incompatible with the security state.
    • Registan guest blogger Dillorom Abdulloeva writes about domestic violence in Uzbekistan.
    • Steve Munro has an open thread about the different ways to travel between Toronto and New York City. What’s quickest?
    • Supernova Condensate examines the concept of superhabitable planets.
    • The Volokh Conspiracy’s Ilya Somin argues (after others) that immigration can be a way for people to exercise political freedom, by leaving unjust states.
    • Torontoist examines a report on youth violence.
    • Towleroad shares the news of the new Spanish cardinal, who thinks that homosexuality is a medically correctible defect.

    [BLOG] Some Tuesday links (1)

    I accumulated quite a few links over the long weekend just past in Canada, Monday having been Canada Day. That volume will make for two [BLOG] posts today.

    (Feedly, thankfully, seems to be working well.)

    • Bag News Notes compares coverage of the protests in Brazil and Turkey, arguing that although the photos from the two countries convey similar images of violence, in actual fact the Brazilian protests are encountering less violence and are getting substantially more response from the national government than their Turkish counterparts.
    • The Dragon’s Tales notes a recent study suggesting that gas giants–heavy planets like Jupiter and Saturn, not their smaller ice giant kin like Uranus and Neptune–seem to form, on the relatively rare occasions they do form, close to their sun.
    • Daniel Drezner considers the ethics of institutions of higher education receiving very large grants from foreign governments. Does it compromise them and/or can it engage them with the wider world?
    • Eastern Approaches notes the likely dire consequences on press freedom in Ukraine of a gas magnate’s purchase of Forbes‘ Ukrainian edition.
    • The Everyday Sociology Blog takes a look at what, if anything, the inability of Trayvon Martin witness Rachel Jeantel to read a handwritten note says about social capital.
    • Far Outliers’ Joel describes the medieval Venetian empire, the stato da mar, at its peak.
    • At A Fistful of Euros, Edward Hugh makes the case that the Czech economy is bound for stagnation.
    • Geocurrents maps the regional and ethnic dimensions of the recent Iranian presidential election.
    • Joe. My. God. links to Nate Silver’s chart showing the progression of same-sex marriage rights across the world, by population and by continent.
    • Language Hat examines the question of what exactly is Aranese (the Gascon Occitan dialect spoken in northwestern Catalonia, for starters).
    • New APPS Blog analyses a secular French feminism that is nonetheless anti-gay.
    • Progressive Download’s John Farrell argues that Slovenia is caught in an unusually intense form of stagnation stemming from its managed transition from Communism.
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