- Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. The opinions expressed are his own.-
Argentina should be an object lesson for the U.S.
A century ago, it was one of the richest countries in the world. Today, it has fallen far behind Europe and North America, after a hundred years marked by long periods of recession.
Faced with economic crisis, for example during World War I and the Great Depression, Argentina’s politicians turned to socialism. Lame-duck industries were subsidised and protected from competition, and policy was often driven by powerful vested interests such as the trade unions.
Profligate government spending was initially financed by borrowing, and then by printing money. The result was rampant inflation, which damaged investment and growth by making it almost impossible for businesses to plan ahead.
A new IEA study, Economic Contractions in the United States: A Failure of Government, suggests that President Obama’s current economic policies could be similarly ruinous - though, to be fair to Obama, the authors point out that these policies were started by George W. Bush.