Opinion – Argentina’s Use and Abuse of Keynes by Andrés Velasco – Project Syndicate – John Gelmini

Map of Argentina with it's terrain levels

Map of Argentina with it’s terrain levels (Photo credit: Wikipedia)

Dr Alf is correct and Andres Velasco has stated a fundamental truth in that if the basics are right with an economy and things are in balance economies work and countries prosper and that when they are not things go wrong.

A Keynesian stimulus, plus an “attitude refit” is probably the only thing that can help Southern Europe now but Argentina like a person who needs a glass of wine to aid the digestion of their evening meal has had so many glasses that they have pickled their livers at a time when all surgeons are on holiday and treatments are being rationed.

Argentina has become quite good at developing software but I cannot think of a single thing it produces that anyone would want to buy outside of Argentina – I’m excluding beef and wine!

So whereas a country like Italy has to make and sell more leather goods, Ducatis, multi million pound sports cars, machinery, impossibly expensive fashion, holidays, wine and spaghetti to discerning foreign buyers, all over the world, Argentina is not in a position to do so, no matter how many Keynesian stimulii it engages in.

France, Spain, Portugal and Greece all have things which could be exported and which are unique to them as does the UK but all of them fail to develop robust plans to create more of these items, identify markets and sell them in enough quantity to make their economies work properly.

Instead they rely on cutting and domestic demand which means that most people do not save anything and in one way or another rely on or are subsidized by the state.

Those countries can use Keynes but care is needed not to waste too much of the stimulii on domestic consumption.

With Portugal, Professor Michael Porter, of Harvard University, has been trying to help that Government develop a more competitive, export focused economy for some years now. But the good professor has discovered and probably already knew that the Portuguese business mentality is insufficiently robust and lacking in the messianic drive that countries like South Korea display when exporting/bringing in foreign exchange.

Argentina has little or nothing to export to anyone and has damaged domestic confidence as well. I fear Keynes would definitively not approve.

John Gelmini

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