A Lesson on Socialism

I am not sure what our younger generation is learning in school about history or the world. It is shocking to me to see so many young students, supposedly bright college kids, waving the Bernie Sanders flag and waving the Hillary flag for her brand of socialism. If you know any of those smart young people send them this description of socialism in Argentina. (taken from the February 8 edition of The New American) Argentina A more instructive example is the case of Argentina, whose experimentation in socialism closely paralleled that of the U.K., but with far more damaging consequences. Like the U.K., Argentina possessed one of the world’s strongest economies in the years leading up to World War I (the 10th largest economy in 1913). Unlike the U.K., however, this economic strength was due more to accidents of geography than to enlightened public policy. Argentina is blessed with a vast and fertile agricultural belt, as well as abundant mineral resources. By the beginning of the 20th century, money was flowing into the republic on the River Plate, thanks to exports of beef, wheat, and wool. Her public debts were low, and her gold and silver reserves among the world’s largest. Like the United States, Argentina weathered several sharp recessions in the late 19th and early 20th centuries, and emerged largely unscathed. Spared the ravages of two world wars, Argentina continued to prosper relative to most of the rest of the then-developed world; even the Great Depression took a comparatively minor toll. Argentina’s Achilles’ Heel has ever been political instability. Prone, like most of the rest of Latin America, to military coups, Argentina never developed the enduring enlightened legal traditions of the British or the Americans, and was far more vulnerable to radical socialist reforms. Argentina’s turning point came at the same time as Britain’s. In 1946, while Clement Attlee was beginning his postwar socialist transformation of the U.K., a brash young politico named Juan Perón was swept to power in Buenos Aires after electoral promises of land reform, social security, higher worker wages, and other elements of the socialist program. Perón encountered little legal or institutional resistance to his socialist reforms, which he enacted with a vengeance. Perón instituted a regime of wage and price controls (including such abuses as a 1947 law dictating restaurant prices and menus), clamped down on international trade, seized private property for the government, spent lavishly on infrastructure projects, built up labor unions — and paid for all of it by printing money. For a few years, Argentina was able to use wartime reserves to help pay for Peronist extravagance, but by the 1950s the bill had begun to come due, in the form of economic stagnation. Undeterred, Perón rolled out two Five Year Plans, the gist of which was to favor agriculture over industry. Wearied by the blizzard of new socialist controls, Argentines applauded Perón’s ouster in 1955 by yet another military coup. But the damage was done. Having had a taste of socialism and welfarism, Argentines were reluctant to let it go. During the 1950s and ’60s, what was generally a period of strong economic growth elsewhere in the developed world brought mostly economic decline for Argentina. Despite her enviable natural abundance, her economy continued to decline and massive public debt, coupled with soaring inflation, became permanent fixtures on the Argentine economic landscape. Chronic political instability continued as a succession of Argentine governments continued to try to make Peronist socialism work, but without success. It was Argentina’s unending malaise that led to a communist uprising in the 1970s, which was suppressed by yet another military coup. Argentina’s military junta, in turn, fell from power after its disastrous loss to Britain in the 1982 Falklands War, setting off one of the worst episodes of hyperinflation in world history. By the end of the 20th century, a prostrate Argentina was no longer able to service her gargantuan public debt, and defaulted on her obligations to foreign lenders at the end of 2001. This, the largest public default in history, ushered in a devastating depression and an unprecedented wave of crime and civil unrest that lasted for several agonizing years. Yet when the worst was over, Argentines, unchastened by 60 years of failed socialist experimentation, elected leftist Nestor Kirchner, who immediately began implementing tried-and-failed socialist nostrums such as price controls and the nationalization of private assets. By restructuring Argentina’s public debt and paying off some of it, Kirchner was able to postpone the evil day. But his policies, and those of his wife and presidential successor Cristina Fernández, continued the Peronist and socialist legacy, leading to a return to economic malaise and a second Argentine default in 2014. President Fernández blamed all of Argentina’s ills on wicked capitalists, as socialists are wont to do, but the historical record in Argentina is devastating to the case for democratic socialism. Argentina is an excellent cautionary tale of what even “a little” socialism can accomplish when it is allowed to operate unopposed. Socialism Argentine-style did not bring about the gulags and extreme despotism and impoverishment of true communism, but it led to civil war, military dictatorship (complete with tens of thousands of “disappeared” citizens), and economic devastation. It has created a culture of entitlement second to none (a former classmate of mine in Argentina, now living in Spain, recently told me that most of our Argentine high-school classmates from the late 1970s took government jobs and are now — in their early 50s — retired and pensioned). From once having the world’s 10th largest economy, Argentina now weighs in at about number 24, right behind Poland. But in terms of GDP per capita, the former jewel of South America has fallen to an abysmal number 54, just ahead of West African nation Gabon, and behind the likes of Kazakhstan, the Seychelles, and Equatorial Guinea. Charlie Caliri

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