Matt Yglesias

Growth Under Communism

One point Charles Kenny makes in The Success of Development that I’ve also seen argued convincingly in other contexts is that public policy choices seem to matter less than people would lead you to believe. This is a particularly striking fact:

Looking more broadly at the experience of the communist bloc under communism, over the period 1950-1988, no East European country grew as slowly as the UK, Mexico, Switzerland, Colombia, the US, Australia, India, New Zealand, Peru, Chile, Argentina or Venezuela.

People right sometimes about the poor policy choices that led to Argentina’s poor growth performance in the 20th century. But it’s hard to make the case that Argentina was following worse policies during this period than Poland. Also: “Between 1928 and 1937, at the same time as farms were brutally collectivized, famine killed as many as 10 million people in the Ukraine, and Stalin‘s great terror was unleashed, the Soviet Union was the fastest growing country in the world.”

NB: I am not advocating Stalin-style economic policies.

The Fall of Argentina

Changes in the global pecking-order are relatively rare. The tendency is for countries that are doing well to keep doing well, whereas those countries that are doing poorly keep doing poorly. But not always. As of the first world war, Argentina was one of the richest countries in the world for many of the same reasons that the United States was one of the richest countries in the world. But the two countries’ trajectories began to diverge enormously after the Great Depression:

The Depression brought FDR and a more active federal government to the US. To Argentina it brought dictatorship. Nationalism and self-sufficiency became attractive; hapless democratic governments passing power ineffectually between each other did not. The man who came to embody the new doctrine, Juan Perón, was one of the leaders of a military coup in 1943. He became president in 1946 and projected an ­assertive, disciplined nationalism. He encouraged a cult of personality and urged Nazi-style economic self-sufficiency and “corporatism” – a strong government, organised labour and industrial conglomerates jointly directing and managing growth. These ideas came to the US, too, but few took them seriously. [...]

In 1950 Argentine income per head was twice that of Spain, its former coloniser. By 1975 the average ­Spaniard was richer than the average Argentine. Argentines were almost three times richer than Japanese in the 1950s; by the early 1980s the ratio had been reversed.

I’m not sure there’s a totally unequivocal lesson here for the present crisis other than to make the point that it really really really matters a great deal to try to make these decisions correctly.