At the dawn of the 20th century, Argentina outperformed Germany and France in per-capita Gross Domestic Product, and the country was growing at a faster pace than the United States. Yet, state-led economic meddling, and the lavish public spending introduced in the 1940s by General Juan Domingo Peron – a political icon whose party still pervades Argentina’s life and way of thinking – thwarted that upward trend.
The country’s economic trajectory has since been one of decline. In the stream of economic erosion runs deep a shared anti-market vision – represented by Peronism.
The result thereof is that – apart from some ephemeral bouts of market-friendly policy stances – political leaders hardly dare to stand up against conventional wisdom. In order to stay popular, they eschew badly needed supply-side reforms and public-budget streamlining. In both countries, governments tend to bequeath to their successors problems they have the possibility, and responsibility, of tackling and solving.
The art of procrastination attained recent peaks during the presidential terms of of Jacques Chirac in France (1995-2007) and the Peronist Kirchner couple – Nestor and Cristina – in Argentina (2003-2015).
Under the Kirchners the budget deficit is equivalent to 6-7 percent of GDP, and welfare programs have reached unsustainable levels: Forty percent of Argentinians receive a pension, a salary or a social-welfare benefit from the government – a proportion that doubled during the three-term reign of the Kirchner family.
Taxes, including on exports, and capital controls have put a break on productivity growth, thereby hampering Argentina’s international competitiveness.
Ms. Kirchner, whose mandate expired Dec. 10, thus leaves an economy in shambles to her successor.
A few days before her departure, Ms. Kirchner pushed a Peronist-controlled Congress to approve a further expansion of public spending and the issuance of $1.15 billion of public debt.
Had she wished to make the task of her successor still more difficult, she would not have behaved in a different manner.
However strong Macri’s intention to carry out pro-market reforms may be, the constraints he will be facing are anything but negligible.
For starters, Macri won by a narrow margin of less than 3 percent, which shows the public’s limited approval to his reform program. In addition, more provinces voted for the Peronist candidate than for Macri – and Macri will lack a majority in the Congress.
Does this mean that Macri’s presidency is doomed to procrastination as usual? Not necessarily, for there are a few glimmers of hope.
First of all, the fact that Macri does not come from the political establishment makes him an atypical president, less prone to the traditional procrastination game.
Add to this the fact that, under Kirchnerismo, state dirigisme has wreaked havoc on the economy. Argentinians may therefore be more willing than in the past to give a try to the pro-market policies advocated by their new president.
The defeat of the Peronist candidate is expected to create turmoil and scapegoating within Peronism. That could make it easier for Mr. Macri to strike deals with the less ideological or more pragmatic factions of the opposition in Congress.
To succeed, President Macri must deploy not only political determination, but also the shrewdness needed to negotiate with Congress, and the pedagogic skills necessary to galvanize public support to his reforms.
Though not impossible, the mission is colossal.
