Lessons from Juan Peron's rule in Argentina
How fast can a successful, modern nation sink into insolvency and financial ruin?
It took the former Soviet Union perhaps 50 years, depending on where one marks the onset of the fall.
But the world has also watched much faster implosions, and the record is probably held by Argentina under Juan Peron.
In 1946 Argentina was a wealthy, prosperous, modern nation. Then Juan Peron--a military officer with no experience in business or economics--was elected president, largely by promising a wealth of "free" benefits to the poor. His method of operation was to simply ignore all legal constraints, knowing that no one in the nation had the power to oppose him. In essence, he did anything he wanted and dared anyone to call him on it.
Peron demonized the rich and targeted large companies as the enemy, which enabled him to quickly nationalize virtually every significant aspect of Argentina's economy: the central bank, railways, telephone service, broadcasting, oil refining, gasoline retailing, electricity, fishing, airlines, steel manufacture, insurance--you name it.
He was supported in these actions by mobs of workers directed by him and his wife. The Peronista mobs freely roamed the capital city, unopposed by the police, and in minutes would literally wreck any business whose owners spoke against a proposed nationalization or otherwise offended Peron.
He decreed that there would be a single, government buyer--reassuringly called the Institute for the Promotion of Trade--for the nation's mostly exported grains and oilseeds. The agency proceeded to wreck the country's formerly hugely productive agricultural sector, Argentina’s main source of export earnings.
By 1951--just five short years after he took office--the nation's financial reserves were exhausted, inflation was climbing and productivity had plunged. The combination of massive new welfare programs and the government takeover of the most profitable industries (and subsequent mismanagement by Peron's handpicked supporters) had the predictable economic effect. But despite the worsening eonomic conditions, Peron remained popular with his base, who continued to benefit from the array of government giveaways.
As the economy spiraled downward, Peron began blaming his troubles on "enemies of the state:" Britain, the U.S. and all foreigners. He took over the country's flagship newspaper, La Prensa, when it began criticizing his policies.
At a time when skilled professors were in short supply, he fired more than 1,500 university professors who opposed his policies. Some universities were closed for years. In a move forecasting Pol Pot in Cambodia two decades later, Peron fanned suspicion and resentment of university students. His mobs painted the slogan "Build the Fatherland--kill a student" all over Buenos Aires. Another popular slogan reflecting the class warfare was "Shoes, yes! Books, no!"
Finally he began to suspect the Catholic church of opposing him, and in 1955 his mobs destroyed many churches, including two of most beautiful in Argentina, San Francisco and Santo Domingo.
That was the last straw, and the army staged a coup. Peron fled to neighboring Paraguay.
Unfortunately his successors couldn't dismantle the army of public employees Peron had built, and thus couldn't get back to the minimum government which had allowed Argentina to become wealthy in the first place. Labor violence and strikes by the powerful unions were a recurring problem.
A thriving nation was plunged into riot and ruin in just five years. It's a lesson worth studying.
There's an odd footnote to Peron's story: His diehard base never made the connection between his policies and the implosion of the economy, and continued to support him while he lived overseas. Eventually, after 18 years of absence, he returned to Argentina and was elected president again, with his wife as vice-president. However, he died nine months later.
It took the former Soviet Union perhaps 50 years, depending on where one marks the onset of the fall.
But the world has also watched much faster implosions, and the record is probably held by Argentina under Juan Peron.
In 1946 Argentina was a wealthy, prosperous, modern nation. Then Juan Peron--a military officer with no experience in business or economics--was elected president, largely by promising a wealth of "free" benefits to the poor. His method of operation was to simply ignore all legal constraints, knowing that no one in the nation had the power to oppose him. In essence, he did anything he wanted and dared anyone to call him on it.
Peron demonized the rich and targeted large companies as the enemy, which enabled him to quickly nationalize virtually every significant aspect of Argentina's economy: the central bank, railways, telephone service, broadcasting, oil refining, gasoline retailing, electricity, fishing, airlines, steel manufacture, insurance--you name it.
He was supported in these actions by mobs of workers directed by him and his wife. The Peronista mobs freely roamed the capital city, unopposed by the police, and in minutes would literally wreck any business whose owners spoke against a proposed nationalization or otherwise offended Peron.
He decreed that there would be a single, government buyer--reassuringly called the Institute for the Promotion of Trade--for the nation's mostly exported grains and oilseeds. The agency proceeded to wreck the country's formerly hugely productive agricultural sector, Argentina’s main source of export earnings.
By 1951--just five short years after he took office--the nation's financial reserves were exhausted, inflation was climbing and productivity had plunged. The combination of massive new welfare programs and the government takeover of the most profitable industries (and subsequent mismanagement by Peron's handpicked supporters) had the predictable economic effect. But despite the worsening eonomic conditions, Peron remained popular with his base, who continued to benefit from the array of government giveaways.
As the economy spiraled downward, Peron began blaming his troubles on "enemies of the state:" Britain, the U.S. and all foreigners. He took over the country's flagship newspaper, La Prensa, when it began criticizing his policies.
At a time when skilled professors were in short supply, he fired more than 1,500 university professors who opposed his policies. Some universities were closed for years. In a move forecasting Pol Pot in Cambodia two decades later, Peron fanned suspicion and resentment of university students. His mobs painted the slogan "Build the Fatherland--kill a student" all over Buenos Aires. Another popular slogan reflecting the class warfare was "Shoes, yes! Books, no!"
Finally he began to suspect the Catholic church of opposing him, and in 1955 his mobs destroyed many churches, including two of most beautiful in Argentina, San Francisco and Santo Domingo.
That was the last straw, and the army staged a coup. Peron fled to neighboring Paraguay.
Unfortunately his successors couldn't dismantle the army of public employees Peron had built, and thus couldn't get back to the minimum government which had allowed Argentina to become wealthy in the first place. Labor violence and strikes by the powerful unions were a recurring problem.
A thriving nation was plunged into riot and ruin in just five years. It's a lesson worth studying.
There's an odd footnote to Peron's story: His diehard base never made the connection between his policies and the implosion of the economy, and continued to support him while he lived overseas. Eventually, after 18 years of absence, he returned to Argentina and was elected president again, with his wife as vice-president. However, he died nine months later.
posted by SF at
8:40 AM
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