With Peronists Back in Power, Inflation Up and Economic Freedom Down in Argentina
James M. Roberts / Cristian Lopez /
The results of The Heritage Foundation’s 2021 edition of the Index of Economic Freedom will be announced soon. But here is a sneak peek: economic freedom in Argentina, which had registered considerable improvement during the four years of the center-right Macri government, has begun to decline (again) in the year since the Peronist Party returned to power in the Casa Rosa.
Once one of the world’s wealthiest nations, Argentina is South America’s second-largest country. It has vast agricultural and mineral resources, and a highly educated population. But it also has a long history of political and economic instability because of the decades-long dominance of the Peronist Party.
As Heritage analysts have reported, Colonel Juan Perón, an admirer of Hitler and Mussolini, seized power in a 1943 military coup in Argentina with the support of leftist labor unions. He and his henchmen deployed the same fascist tactics and goon squads as his idols had to consolidate power.
Eventually, Perón built a sprawling welfare state to purchase future voter loyalty and put together a brutally effective “Perónist” political machine, which has de facto ruled Argentina for most of the nearly eight subsequent decades.
In the process, Perón nationalized industries, established inefficient and corrupt state-owned enterprises, imposed Marxist-inspired “import substitution” policies, created a government monopoly to control all exports, jailed political opponents, and censored media critics.
Peronist President Alberto Fernández and Vice President Cristina Fernández de Kirchner, Fernández’s predecessor as president, began their four-year terms in December 2019. Their party controls both chambers of Congress. Fernández de Kirchner and her late husband, Nestor Kirchner, previously held the presidency from 2003 to 2015.
In 2020, the government struck a preliminary deal with bondholders to resolve the most recent of its nine sovereign debt defaults. Nevertheless, disillusionment among Argentines remains widespread because of the country’s weak economy and still-unresolved public debt crisis.
That disillusionment is rooted in decades of economic mismanagement and corruption under the Peronists. Taxing and overspending is the Peronist motto. Now that Argentina is again largely shut out of global capital markets, the non-independent central bank is simply printing pesos to make up the Peronist government’s persistent deficits.
The Economist reported last fall that despite “price controls, the inflation rate exceeds 36%.” According to Reuters, high inflation has continued in 2021.
According to Johns Hopkins economics professor Steve Hanke, the actual inflation rate in Argentina in the last six months has been as much as four times higher than the official rates published by the government’s national statistics office.
Unfortunately, the current Peronist government’s agenda, intended to reverse many of the reforms made by the previous, center-right administration, includes import and currency controls, expropriation of firms in key sectors, and new subsidies. Those policies are likely to continue to degrade economic freedom in several areas, notably in declining monetary freedom.
To really reverse that negative trend and put the country back onto a sustainable path to greater economic liberty and prosperity, a future government would have to control the presidency and the legislature. It is up to Argentines to elect such a government with a mandate to make the painful and deep structural reforms required to uproot the cumulative and toxic impact that Peronism has had on Argentina.
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