Working document - Thinking development for today's Argentina

The discussion on development in Argentina

Natural Resources Area & Productive Development Area

02/12/2020 2 min de lectura

Argentina’s economic trajectory has been  characterized by marked volatility and, since the 1970s, disappointing economic performance. The cyclical alternation of periods of growth and contraction is punctuated by recurring crises, which are usually associated with a fall in real wages and an increase in inequality. This erratic trajectory has impacted the Argentine population’s levels of well-being. In recent decades, our country has fallen behind relative to developed and recently developed countries, has performed worse than medium and large economies in the region, and has converged to the per-capita income level of countries it had an advantage over half a century ago.

This oscillating trajectory stems from enduring contradictions in the country’s political economy. Coalitions of actors with conflicting interests and preferences regarding the relative prices of agricultural goods are at the root of the Argentine economy’s cyclical “nature” during most of the 20th century. Each of these coalitions espouse different and conflicting views regarding the “correct” development strategy to achieve sustained growth. On the one hand, an inward-looking or domestic market-based development vision is advanced by a “defensive” coalition of socioeconomic actors that focuses on the expansion of domestic demand and the protection of local producers. These expansionary policies, as a means for achieving productive transformation with social inclusion, typically face strong restrictions on the external front. On the other hand, an “offensive” coalition proposes an static view of outward-looking development. According to this view, the country’s productive strategy should be based on its pre-existing comparative advantages, i.e. natural resources sectors and their derivatives. This approach sees no role for state intervention or productive development policies, which introduces a systematic bias that in practice compromises the very objective of development. In spite of their stark differences, these conflicting economic programs share a common attribute: they are characterized by one or another form of intertemporal myopia. A sole focus on its social basis’ short term goals compromise encompassing long-term objectives and eventually leads to a new crisis. 

Escaping the trap of instability and cyclical crises calls for  doing something new  to avoid repeating the setbacks of the past. Crucially, it requires implementing a dynamic outward-looking development strategy. Such strategy must seek the social and political balances necessary for maintaining a steady course while promoting productive development policies aimed at generating dynamic competitive advantages in knowledge-intensive sectors close to the global productive and technological frontier. The dynamic outward-looking growth strategy raises a challenge that is more political than economic: without stabilizing a broad social support base, articulated around medium and long-term commitments, it will be very difficult to achieve the developmental leap necessary to guarantee common prosperity with equity in contemporary Argentina.

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