Argentina is stuck in a bad equilibrium

The party is over for Milei (Source: here) 

At the start of the 20^th Century, Argentina was one of the world’s richest countries. It has been in decline ever since. As the chart below illustrates, Argentina has been falling further and further behind its peers for more than a hundred years. No other country displays greater dissonance between its potential and its actual performance than Argentina.

Argentina's GDP as a percentage of the GDP of the twelve richest countries (Source: here) 

This weekend, observers were once again reminded of Argentina’s refusal to move forward, when the ruling party of President Javier Milei suffered a calamitous defeat to the hands of Peronists in the Province of Buenos Aires legislative election.

The Peronists took 46.8% of the vote versus 33.8% for Milei’s party (Source: here).

Quite a bitch-slap.

To some, Javier Milei was the man to save Argentina, when he first took office on 10 December 2023. His style was brash and bold, his policies extremely libertarian. He seemed to be a breath of fresh air after years of Peronist stagnation and corruption. Yet, less than two years into his term he just ‘lost’ Buenos Aires.

To put the significance of Milei’s defeat into context, Buenos Aires is Argentina’s largest province with one third of the country’s population. In political terms, where Buenos Aires goes the country soon follows. Milei’s election defeat is therefore nothing short of disastrous.

To make matter worse, the big winner in the election was Provincial Governor Axel Kicillof, who, until not so long ago, was economy minister under former President Cristina Fernandez de Kirchner. Kicillof’s stewardship was characterised by dramatic economic decline and a sovereign default (Source: here).

Axel Kicillof (Source: here) 

So, having flirted for a couple of years with Milei’s Far-Right populism, Argentina’s voters now seem ready to revert to Kicillof’s Far-Left populism and Peronism.

I am familiar enough with Argentine politics to state with conviction that Kicillof and the Peronists will not make Argentina a better place. Argentina's Far-Right and Far-Left populists have repeatedly failed the country, the only difference between the two being who has their snout in the trough.

Stuck in this populist doom-loop of political failure, Argentina’s endless decline therefore looks set to continue, punctuated only by the usual macroeconomic crises at fairly regular intervals.

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Yet, despite an overwhelming volume of evidence to the contrary many outside observers still find Argentina’s long-term decline puzzling. How can this beautiful and well-endowed country, which simply oozes with mesmerising potential, not succeed?

I too fell into that trap once.

The first time I flew into Buenos Aires was a cold, crisp, clear and cloudless morning. The plane was coming in from the north, crossed over the steely expanse of the River Plate, and then circled in a vast sweep around Buenos Aires' southern perimeter before coming in to land at the airport on the city's eastern fringes.

Beneath me stretched the boundless Pampas. Even from the great height of the aeroplane, I was unable to see the end of the grasslands as they slid beneath Earth’s gentle curvature. As we descended, I saw white morning mist-banks nestled in hollows and cattle paddocks full of fat cows living good lives before facing the butcher's knife. I was smitten before I had even landed!

An evocative passage from a book I was reading at the time captured exactly how I felt at this, my first sighting of the Pampas:"Under the wings of an airliner it strokes past like some forgotten utopia, all fair, all flat, all limitless, yet so supremely satisfying to the weary eye that it suggests the somnolent soft murmur of a final dream" (J. Crow, The Epic of Latin America, p. 346).

I have since been back to Argentina many times. My initial infatuation has faded to a dull but oddly pleasing ache. I can still sense Buenos Aires’ seductive quality, like being in the presence of an ageing but still beautiful fallen heroin.

I still enjoy taking coffee in small sidewalk cafés and walking the cobbled streets of San Telmo, the Bohemian quarter, and frequenting its antique stores with relics of Argentina's great past; gorgeous handcrafted furniture from the finest European carpentry shops of a 100 years ago, statues in Italian marble, gold-encrusted mirrors, precious if faded paintings, mahogany and ivory boxes with fine silver cutlery, and photographs from a time before Argentina's great promise was squandered on excessive living and the pursuit of power and vanity.

I still hear the echoes of Argentina’s illustrious past on the streets of Buenos Aires; the shabbily-clad dancers, who, for a few pesos, offer passers-by a moment in their arms and in the melancholy of a tango. Or La Recoleta Cemetery, a city for the dead, in which avenues of miniature mansion-graves provide rest to families, who, having fallen from grace still proclaim pride in their country from within coffins in black marble and gold leaf.

Still, what was once to me a country of youthful beauty, aspiration, and freshness has by now morphed in my heart and mind into a failed genius, a broken promise, the brightest hope vanquished, a love that not even heartbreak can destroy.

Argentina drowns in glorious self-delusion every day, because without self-delusion this once great nation has nothing; self-delusion is the reason it is able to carry on in the face of certain decline.

And Argentina's decline is indeed a certainty. Its demise is structural, rooted in weak government due to a flawed constitution that assigns two-thirds of political power to the provinces. The provinces use their powers to suck resources from the central government until it collapses. This process repeats itself over and over ad infinitum.

Indeed, so entrenched is this process that Argentina has developed its own unique brand of political culture. All who run for president instinctively know they cannot actually change the country, so the only game in town as far as politicians is concerned is to put on a really good show in order to steal as much money as possible for as long as possible. 

Carlos Menem, Nestor Kirchner, Cristina Fernandez de Kirchner

Only charlatans and crooks thrive in this political culture, where the highest virtue is "to get away with it". This why Argentina’s leaders have all been either photogenic or charismatic, or both, and why all of them are corrupt. The smartest of them, such as Nestor Kirchner, also became authoritarian in order to hold on to power just that little bit longer.

Javier Milei campaigned with a chainsaw to underline his commitment to cutting spending (Source: here)

Javier Milei with his famous chainsaw is the latest reincarnation of Argentina’s long line of populist leaders from Left and Right. Others include Alberto Fernandez, Mauricio Macri, Cristina Kirchner, Nestor Kirchner, and so on and so on all the way back to Eva and Juan Peron.

Juan Peron (Source: here)

Eva Peron (Source: here)

However, the real tragedy of Argentina is not even its corrupt leaders, but rather the constitution that produces such awful leaders. Nothing will ever change in Argentina until the strangle-hold of the provinces on the central government is broken, but this looks unlikely since it would require constitutional change, which is only possible with a 2/3 majority in parliament. Argentina’s provincial governors, who just happen to control 2/3 of the seats in parliament, will never vote for any proposal, which gives more power to the central government at their own expense. Turkeys do not vote for Christmas, not even in Argentina.

Which leaves Argentina well and truly stuck in a very bad equilibrium.

Personally, I was never taken in by Javier Milei, who always seemed like just another populist to me. Besides, he had no plan for how to change Argentina’s all-important constitution, which I see as one of the defining characteristics of a serious politician in Argentina.

So, as we look forward to the 2027 presidential election I am prepared to make a bet: Alex Kicillof becomes Argentina’s next president.

The End