FacebookTwitterGoogle+RedditEmail

Argentina and the Magic Soybean

by MARK WEISBROT

One of the great myths about the Argentine economy that is repeated nearly every day is that the rapid growth of the Argentine economy during the past decade has been a “commodity export boom.” For example, The New York Times reported last week:

“Riding an export boom for commodities like soybeans, Argentina’s economy grew at an average rate of 7.7 percent from 2004 to 2010, almost twice the average annual growth of 4.3 percent in Chile, a country often cited as a model for economic policies, over the same period.”

Michael Shifter, the President of the Inter-American Dialogue and probably the most-quoted source on Latin America in the U.S. press, wrote in a disparaging article about Argentina this week that

“If the sales and price of soybean, Argentina’s principal export (mainly to China), remain high, then the country may be able to continue its path of economic growth.”

I haven’t seen any economists make the claim that Argentina’s remarkable economic growth over the past nine years – which has brought record levels of employment and a two-thirds reduction in poverty – has been driven by soybeans or a commodities export boom. Maybe that’s because it’s not true.

I know what you are thinking: “Who cares?” Well, try to keep reading, because this does have implications beyond the sprawling soybean farms in the Argentine province of Cordoba.

What does it mean to have a “commodities boom,” or growth driven by the export of commodities? One possibility would be based on quantity: The production and export of these commodities grows so fast that it makes up a large part of the country’s real growth in output. Thus, as a matter of accounting, we could look at real GDP growth for 2002-2010* and ask, how much of this real (inflation-adjusted) growth is due to exports of commodities?

It turns out that only 12 percent of Argentina’s real GDP growth during this period was due to any kind of exports at all. And just a fraction of this 12 percent was due to commodity exports, including soybeans. So Argentina’s economic growth from 2002-2010 wasn’t an export-led growth experience, by any stretch of the imagination; still less a “commodities boom.”

The other possibility is based on prices: The price of soybeans and other commodity exports also rose during part of this period. This can boost the economy in various ways, even if the physical amount of exports doesn’t increase as rapidly as the economy. If this were driving Argentina’s growth, we would expect the dollar value of these exports to have grown faster than the rest of the economy. But this didn’t happen either. The value of agricultural exports (including of course soybeans), as a percent of Argentina’s GDP didn’t rise during the expansion. It was about 5 percent of GDP when the economy started growing in 2002, and 3.7 percent of GDP in 2010.

In other words, there’s no plausible story that anyone can tell from the data to support the idea that Argentina’s growth over the past nine years was driven by a “commodities boom.” Why does this matter? Well, as economist Paul Krugman noted yesterday, “articles about Argentina are almost always very negative in tone — they’re irresponsible, they’re renationalizing some industries, they talk populist, so they must be going very badly.” Which, he points out, “doesn’t speak well for the state of economics reporting.” It sure doesn’t.

The myth of the “commodities export boom” is one way that Argentina’s detractors dismiss Argentina’s economic growth as just dumb luck. But the reality is that the economic expansion has been led by domestic consumption and investment. And it happened because the Argentine government changed its most important macroeconomic choices: on fiscal, monetary, and exchange rate policies. That is what took Argentina out of its 1998-2002 depression and turned it into the fastest-growing economy in the Americas.

Now for the world-wide significance of how Argentina’s recovery actually happened: as I and many other economists have written, the policies currently being imposed on the eurozone economies – especially the weaker ones – are similar to what Argentina went through during the depression that led to its default and devaluation. These policies were pro-cyclical, meaning that they amplified the impact of the downturn. Together with a fixed, overvalued exchange rate, they made the economy worse. By defaulting on its debt and devaluing its currency, Argentina was freed to change its most important macroeconomic policies.

If the European authorities (the European Commission, the European Central Bank, and the IMF) continue to block the eurozone’s economic recovery with senseless austerity measures, individual countries will want to consider more rational alternatives in order to restore full employment. The people of Greece, Spain, Portugal, Ireland, and other countries are told every day that they must swallow this bitter medicine, and that there is no alternative to the prolonged suffering and high unemployment that they are going through. But the Argentine experience – in reality rather than in mythical portrayals – indicates that this is not true. There are definitely better alternatives – and they have nothing to do with soybeans or commodity export booms.

*The last year for which we have complete data on exports.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This article originally appeared in The Guardian

More articles by:

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

Weekend Edition
February 23, 2018
Friday - Sunday
Richard D. Wolff
Capitalism as Obstacle to Equality and Democracy: the US Story
Paul Street
Where’s the Beef Stroganoff? Eight Sacrilegious Reflections on Russiagate
Jeffrey St. Clair
They Came, They Saw, They Tweeted
Andrew Levine
Their Meddlers and Ours
Charles Pierson
Nuclear Nonproliferation, American Style
Joseph Essertier
Why Japan’s Ultranationalists Hate the Olympic Truce
W. T. Whitney
US and Allies Look to Military Intervention in Venezuela
John Laforge
Maybe All Threats of Mass Destruction are “Mentally Deranged”
Matthew Stevenson
Why Vietnam Still Matters: an American Reckoning
David Rosen
For Some Reason, Being White Still Matters
Robert Fantina
Nikki Haley: the U.S. Embarrassment at the United Nations
Joyce Nelson
Why Mueller’s Indictments Are Hugely Important
Joshua Frank
Pearl Jam, Will You Help Stop Sen. Tester From Destroying Montana’s Public Lands?
Dana E. Abizaid
The Attack on Historical Perspective
Conn Hallinan
Immigration and the Italian Elections
George Ochenski
The Great Danger of Anthropocentricity
Pete Dolack
China Can’t Save Capitalism from Environmental Destruction
Joseph Natoli
Broken Lives
Manuel García, Jr.
Why Did Russia Vote For Trump?
Geoff Dutton
One Regime to Rule Them All
Torkil Lauesen – Gabriel Kuhn
Radical Theory and Academia: a Thorny Relationship
Wilfred Burchett
Vietnam Will Win: The Work of Persuasion
Thomas Klikauer
Umberto Eco and Germany’s New Fascism
George Burchett
La Folie Des Grandeurs
Howard Lisnoff
Minister of War
Eileen Appelbaum
Why Trump’s Plan Won’t Solve the Problems of America’s Crumbling Infrastructure
Ramzy Baroud
More Than a Fight over Couscous: Why the Palestinian Narrative Must Be Embraced
Jill Richardson
Mass Shootings Shouldn’t Be the Only Time We Talk About Mental Illness
Jessicah Pierre
Racism is Killing African American Mothers
Steve Horn
Wyoming Now Third State to Propose ALEC Bill Cracking Down on Pipeline Protests
David Griscom
When ‘Fake News’ is Good For Business
Barton Kunstler
Brainwashed Nation
Griffin Bird
I’m an Eagle Scout and I Don’t Want Pipelines in My Wilderness
Edward Curtin
The Coming Wars to End All Wars
Missy Comley Beattie
Message To New Activists
Jonah Raskin
Literary Hubbub in Sonoma: Novel about Mrs. Jack London Roils the Faithful
Binoy Kampmark
Frontiersman of the Internet: John Perry Barlow
Chelli Stanley
The Mirrors of Palestine
James McEnteer
How Brexit Won World War Two
Ralph Nader
Absorbing the Irresistible Consumer Reports Magazine
Cesar Chelala
A Word I Shouldn’t Use
Louis Proyect
Marx at the Movies
Osha Neumann
A White Guy Watches “The Black Panther”
Stephen Cooper
Rebel Talk with Nattali Rize: the Interview
David Yearsley
Market Music
FacebookTwitterGoogle+RedditEmail