I would like to start by putting ourselves in the shoes of an immigrant, leaving Italy just before the first World War, pondering where to go, where to settle in search of a new life. The choice of our immigrant would be to catch a steamship, perhaps to New York or possibly to Bueno areas. The Gresham College lecture that you're listening to right now is giving you knowledge and insight from one of the world's leading academic experts, making it takes a lot of time, but because we want to encourage a love of learning, we think it's well worth it. We never make you pay for lectures, although donations are needed. All we ask in return is this. Send a link to this lecture to someone you think would benefit. And if you haven't already, click the follow or subscribe button from wherever you are listening right now. Now, let's get back to the lecture In 1910, it would be a tough choice about which destination to, to choose. Argentina at that point was one of the wealthiest countries in the world, but the choice made then would have great consequence for the migrants descendants a century later. Let me start off by looking at the difference between income levels in the two countries and with other settle of economies that exported primary products like wheat, such as such as Canada. And you see from this graph that Argentina, the blue line starts off more or less on a par there with Canada bit below the United States. But then look at the huge divergence, which starts to take place in the interwar period, Argentina, now, along with other Latin American countries, lagging far behind in terms of income ahead. So in 1929, just before the Great Depression, Argentina was still a member of that group of rich countries from 1960s, as you should see on that graph, it would've been better for our migrants grandchildren to have stayed in Italy as a percentage of income levels of rich countries in the OECD Argentina fell from about 84% of the average level of those rich countries in 1950 to 65% in 1973, and only 43% in 1987. By the early years of this century, income was only about 40% of the level of Western Europe. Whereas as you saw in 1910, it was on a par. So what went wrong is what I want to ask today. This is what is called by economists, historians, the Argentine paradox, how to explain a 60% relative drop in income levels. And as this graph shows, it was not just Argentina, Latin America as a whole did not do well. But you see that Chile, which I'll be coming on to at the end of my lecture, uh, did start to improve in the 1970s. So we will need to be asking why did Chile manage to pull ahead somewhat To understand that more recent trajectory of Argentina? We should start through an understanding of his economy before the First World War. I'm, I'm a historian, so I like to start with the historic roots of, uh, the, the patterns which I'm looking at, because it was the pattern set before the First World War, which led to various problems. It went to, it led to social and political problems that limited the ability of Argentina to sustain growth and high income. And it led to a strategy of economic nationalism, particularly under Peron, which was based upon import substituting industrialization, an attempt to develop local industries that would replace imports of manufacturers from Europe and from the United States to go for self-sufficiency. So let me start then by looking at Argentina from its independence in the 1820s through to the beginning of the Great Depression in the 1920s. So, Argentina secured independence from Spain in 1810, but that was followed by a long period of turmoil and warfare. The old Spanish vice royalty broke up into different states. They com had competing claims for land I in the, in the area. And that was linked with expansion from Buenos Air, the area around Buenos Aires, into the Pampas and into Patagonia. So this rather fanciful image, um, is showing the war of the desert of 1833 to four. Um, the attempt to drive out the indigenous people and the conquest of the desert of the 1870s and 1880s. It involved the defeat, perhaps the genocide of indigenous people. It also involved the suppression of the gauchos. These were people very often of, of mixed descents of Indian mothers, Spanish fathers who roamed the Pampers living off feral wild horses, cattle and game. They fought against the Spanish in the wars of Independence. They fought in the Spanish War in the desert war. But as the cattle ranches started to settle, settle and to put barbed wire around the, around the pampa, uh, they were seen now as being wild and unc civilized, um, and had to be forced to work on the ranches, uh, to become settled, uh, peons. So it's a period of, of, of instability. And a more settled political system emerged with the election of Julia Rocker as president in 1880, had even made a dominant figure for the next 20 or 30 years. He had been a leading general in the conquest of the desert, and he and the other, so-called Men of 1880, continue to be powerful. And the party that he led and, uh, founded, continued to dominate right up to 1916, the Partido autonomist nationalist. So they retained power despite quite a wide male franchise by ballot, rigging, intimidation. And if all else failed, the president could impose his own own wishes. And of course, he had the army at his disposal. So what we have here is a political system, which is based upon an oligarchic. Autocracy is unlike other settler societies such as Canada and Australia, they're growing the same sort of crops to same markets, but they were not militarized in the same way. They didn't have civil war, didn't have conflicts with the, with the neighbors. They also committed genocide or suppression of indigenous people, but not through the same sort of military process that I outlined there. Two Australian historians stressed that there was a big contrast between what they call the stable, flexible government of Australia and the bad government of Argentina. And they see that going back to this period of the late 19th century as the key to the different trajectory, uh, which we still see today. The government of Argentina encouraged European migrants to replace what were viewed as those uncivilized wild gocho. That migration into Argentina started on a large scale in the 1870s, attracted by higher wages than in, than in Europe. By 1914, 40% of the population of Argentina was foreign born, and many of them were Italian who were distinct from the older Spanish migrants. Many of the Italians were urbanized, and many of them, this is an important point as ied in the lecture, they were had sympathies with socialism and, um, anarchism, unlike Canada and Australia, where most of the migrants were predominantly from the uk, you have this more if like mixed ethnic background. Now, some historians say that that is, again, a crucial difference. I'm a little bit wary about these. So it's like ethnic explanations, but at least, um, some historians, I quote say, a crucial difference with the political tradition and the origins of the immigrant population coming from Britain compared with Southern Europeans in Argentina. There seems to be to be a little bit of, uh, if like Anglos second and superiority about that, that that argument. And I'm gonna be put forward, uh, a somewhat different, uh, take on on why there were differences. One of the major differences, in fact, was the highly reliance upon foreign capital above all from Britain to build railways, to open up the Pampers, to build ports and meat packing stations and cold stores, and to provide utilities such as the gas and Tramways here in Bueno Air, uh, which became a major world city with this branch of Howard's there and the fine sort of Parisian style, uh, boulevards at Grand Opera House, uh, which was near on a par with, uh, with Milan Lascala and so on. So this massive foreign investment from, from Britain. And the interest, um, on that, the shares on those bonds, of course was, was, uh, being passed back to Britain and the return being guaranteed by the Argentinian state. The major banks in Argentina were also British owned, and their roles banks was to service the service the production of commodities for export. Argentina then was not formally part of the British Empire, but it was part of the informal British empire. British overseas capital calls, uh, for Argentina were really, uh, extensive. Uh, you can see, uh, there, where it was going into railways, going to the government, to the utilities I mentioned, but above all building railways. And you see that the Argentina was the third most important destination after the United States and, and, uh, Canada, uh, head of Australia. So we have this, uh, massive amount then of foreign capital, uh, going into Argentina. So there's a big difference from other settler economies in Argentina, heavy alliance upon foreign capital, but very low level of domestic saving, domestic savings rate was only about, was about 10% lower in Argentina than in Australia and Canada, between nineteen hundred and nineteen twenty nine. So low domestic, saving heavy reliance upon capital from outside, reliance upon capital outside means that that is more expensive. The cost of capital were higher. The payment of interest on the capital payment of dividends on that foreign capital took up a very large proportion of the government revenue of Argentina. And also, we should note that politics were different between Argentina and Australia in this, this respect. In the case of Australia, about two thirds of all the capital went to the government of Australia, the provincial or state governments, and the federal government. So that loans were in the hands of representative bodies. So it was democratic controlled, and usually the firms of the utilities were operated by Australians. That was not the case in Argentina, where the ownership was very often outside here in, in London. So although in Australia in the 1920s, thirties, there was resentment at the payment of interest on British loans. It was nothing like the scale, uh, that was found in Argentina. So the results of this, uh, economic and political system was an alliance between British capital based here, mainly in London, and owners of the largest states. The Sania. Give us an example of one which flourished in the late 19th and early 20th century on the basis of an export economy based upon wool, beef and wheat. Well, if you are rich enough and so minded, you can now go and have a wonderful holiday, uh, there living the life of, uh, of a rancher, having a luxurious outdoor holiday, horseback playing, golf, shooting, uh, whatever. Uh, you, you, you fancy. These estancia emerge, uh, in the course of the 19th century. In the early 19th century, Catlan sheep wrote roaming over large tracks of unfenced land. The ranches often used slaves until about 1850. There were large number of sheep from, uh, which were providing wool to Britain. That's what one of the major crops or commodities was. Initially before the development of refrigeration, cattle were used, mainly supply hides for leather going to places in London, like, like bourbon sea, and the carcasses of sheep and cattle were boiled down to produce tallow. And there you see, uh, the, the makeup of the exports for Argentina. So in 1854, about a third of the exports were hides about 8% in wool. And another third or so in tallow, uh, for reusing candles, grease. And so, which is used in industry, and that was still, those were still the dominant trades in 1870. But then from about 1870, with say, the fencing in of the Pampers, uh, the nature of the export market started to change the export of better quality meat and also wheat. So how did this economy work? This cattle economy, which has started become so dominant. Well, cattle were bred on the pampers on pasture, which is being improved from this, its native quality. Those cattle were then sent to the coastal districts to be fattened up on better pasture. And that meat trade was initially in what was called jerked beef, yes, air cured and salted, which is largely sold up into, uh, the Caribbean and Brazil, uh, to be used on slave plantations. So it is, um, a, a lower quality, uh, meat. But then you see the emergence of frozen beef coming in, um, massive expansion from 1894 up to the first World war and the beginning of chilled beef, even, uh, if a higher quality rather than, than frozen. So this development, um, is being controlled by, uh, largely British firms. Uh, there are huge enterprises. Uh, the, the, the ranches, uh, one hacienda, uh, the Sanje Cantu Hacienda had a hundred thousand cattle and 10,000 horses on 244 square miles. So these are massive, uh, uh, ranches, but they're dominated by the cold store firms that are based, uh, on the coast. And those cold store firms and fri uh, refrigerating plants and refrigerated ships were controlled by fn interests. A very few firms. So unlike in, in Canada, Australia, where it was very often the ranchers controlled the trade, they would supply their cattle to the slaughterhouse and the meat packers, in this case, it's the meat packers dominate the, um, internal, uh, trade. And most of those, um, meat packers, refrigeration plants were owned by, as you see here, uh, the Anglo company, uh, this is the Vestis, uh, who own some of you of a certain age like me, can remember Hurst butcher shops on the high streets. They owned these big meat p packing plants, slaughterhouse cold storage in in Bueno Aires in London, just up the road here. Uh, they had one in Smithfield. They own the blue star refrigerated, um, ships. Uh, it's one of the massive companies, one of the richest families, uh, still in Britain. Uh, William Vesti, uh, went out, first of all to Chicago, sent by his father, who was a Liverpool produce merchant. Uh, he went to, uh, uh, Chicago in 1876, and then moved to Argentina in 1890. He opened his first cold store in Liverpool in 1890, uh, set up Union Cold Store, the Blue Star line, and a chain of 2,635 butcher shops, as well as, uh, some cattle stations, uh, himself that he, that he owned. So this system created an alliance of breeders, ERs, railways, meat packers. It was a narrow oligarchy of large landowners who dominated the government. Unlike the small farmers in other settler societies, they worked with British capital in a common interest in expanding exports. At the end of the 19th century, there was also a growth in weak production for export. The acreage of wheat grew by tenfold between 1890 and 1914. But again, this wheat farming was unlike, uh, the pattern found in Australia and Canada. In Argentina, there were not very many small family owned and farm properties. The farmers were predominantly tenants, and the land was held by the large owners who could turn it over at some point to cattle. It was a flexible system, which allowed them to switch easily between wheat and cattle. The tenants, many of whom were Italian, would only hold the property for three years at a time. They would improve the property, improve the, the land, and then the landowners could take it back without compensation for the improvements which were being made. So the Argentinian tenant farmers were more or less nomadic. They didn't settle down in, in communities. They lived on a temporary basis in, in sort of shacks. They didn't have a very powerful community life. They didn't have such democratic politics if the large landowners who dominated and had enormous political power. And that reflected the land policy that was adopted by the government in Buenos Aires, or, or rather, in Buenos Aires province and other provinces, because it was a provincial matter to decide how land was distributed, got the federal government, unlike in, uh, Canada and Australia, where the federal government decided. So in some provinces, like Santa Fe, the provincial government did try to support small farmers. But the major large provinces, the province of Es Aires did not. They ensured that most land was held by larger states with an established land is elite. The tenants were often required by the landowners to grow a crop of alfalfa, which was used as feed for cattle. Now, you would, you had the tendency for three years, you would approve the land to grow the crop. But alfalfa will pa will last properly for 15 years. So you could see there was a little bit of an exploitative relationship going on, going on there. So this was a, a system which was more like exploitative. Other tenants depended upon credit. They were often in debt, and they sold their week to a few large, uh, merchants who, again, could fix the price, uh, to the advantage of the merchants. So there was also immigration going, going to Argentina. But a lot of the profits I'm suggesting were going to the landowners. Let's contrast that with the experience of the prairies of Canada, their family farms were much more powerful, more dominant and tendencies were secure. And that reflected the land policy of the federal government. There was no established land elite. And in Canada, the government adopted the homestead policy in 1872, which followed that, that of the United States of America of 1864, distributing land, more or less free to anybody who was willing to settle on it. So you have owner operated farmers, settle settled population, Which built houses, communities, schools, churches, and very often had cooperative ownership of the grain elevators. So they were more controlling who made the profit from it. So you have this big difference, which you should see in this, um, table here, showing how dominant owner operators were in Canada compared with the Pampa In Argentina, where renters were, were dominated, were dominating. So a big if like social, political economic difference between, uh, these, these areas and much the same would apply to Australia as to Canada. So the prosperity of, um, Argentina, uh, before the First World War rested upon circumstances that limited the prospects of long-term growth. So I'm suggesting that already, even when Argentina was one of the richest countries in the world, there are limits to what what could happen with long-term growth. And strains were already becoming apparent before 1914. One of those strains was over debt and finance. The economy was heavily indebted outside. The government also borrowed heavily the cost of servicing the debt took up a high proportion of revenue, therefore wasn't available for schools, for education, and so on. In 1890, there was a major recession. The servicing of the debt became really, uh, very, very difficult. And that exposed bearing brothers, the great merchant bank based here, here in London, the dominant merchant bank for lending to Argentina bearings almost went bust and had to be bailed out by the Bank of England. It was a potentially like the global financial crisis of 2008. Very, very serious. And that really hit, um, Argentina as well. This threatened the political order in the area, the corruption of the government, the lack of political freedom and rights to selling out to foreign interests. It led to the revolution in the park in 1890 in Buenos Aires, when the Civic union protested against corruption of the government. They called for, uh, political rights, for freedom for liberty. The president resigned, but little else changed. The Argentinian landowners were soon restored. And that, um, nationalist party I mentioned, a rocker regained control by rigging votes, gerrymandering and pre presidential controls. But you also have a threat from the Italian immigrants I talked about who many of whom were anarchists, socialists, ISTs. And they were very powerful amongst immigrants in Buenos Aires. So they wished to overturn the state, uh, this really sort of threat to the political order as it was seen, and were also grievances by the tenant farmers who went on strike in 1912. So the whole system here is, is looking very fragile, very, very strained already. Rocker, whom I referred to back in 1880, he returned as president in 1898. He faced strikes by workers challenges for the anarchists. And in 1891, the civic union, uh, made a deal with rocker, but they'd split. Um, and you get now a new radical civic union, uh, which led to further uprisings. In 1893 and 1905, you have a new president, uh, who, uh, a new leader who eventually becomes president HIPA leader Ir regression Gian. He's opposing the oligarchy of this old oligarchy. He's trying to draw together middle class people, business people, rural workers and settlers, and some cattle ranches as well, uh, in, in, uh, uh, uh, attempt to overthrow this old oligarchy. In 1916, he does become president. The dominance of the old, uh, party, uh, of rocker is, is ended, but it doesn't lead to a massive change. Although he was elected president, he didn't control the, the, uh, the parliamentary system where the conservatives he'll block reform. And he still hoped to continue the old export led model of growth based upon the export of wheat of beef and so on. With, uh, of course, alliance with British capitalists. After the end of the first World War, he combined repression of strikes with some concessions to the workers in terms of minimum wage legislation. So he's combining something which Powan is going to do, if, like, uh, repression with welfare benefits. So what I'm arguing here is that the whole base of the Argentinian economy is very fragile. Argentinian prosperity in 1914, before 1914, was not upon very secure basis. It rested upon a combination of exports dominated by great landowners, financed by British capital that led to a corrupt oligarchic government with the support of the army. And that this oligarchic control was facing opposition from a variety of interests from urban workers, small farmers, urban middle class, who thought that national interests had been abandoned and sold out to British capital. So this system was facing very serious challenge between the wars and an no turn then to what happens with the Great Depression, uh, which strikes in 1929. Well, Argentina had been prospering before the first World War on the basis of an open world economy, free movement of capital, free movement of labor, open trade. It could not work after the war where these conditions changed. Various things happened. If you have, like, you have a process of deglobalization, which had a very major impact on Argentina, as indeed it did on Canada and Australia. But what happens in Argentina is the policy choices make the situation far worse. So deglobalization hits all of these settler economies, undermining the model of growth that existed before 1914. Let me just mention, uh, the major things which happened, first of all is capital. There's a drop in the amount of foreign investments as you see in Argentina. So it comes down from 4% to GDP to, uh, 1.1% and even lower after that. So you're losing capital from overseas. But as I said, uh, earlier on, there's also less domestic saving. And you can see there, the domestic saving rate within Argentina is much lower than it is in Australia than Canada. So what we have here is a lack of investment. Argentinian capital stock have been growing by about 5% a year between 1,919 13, but it then fell to only 2.2% between 1913 and 1929. Very remarkable drop in investment. And that contributes to the relative decline of Argentina, less capital per worker, lower productivity than in Australia and Canada. So that's one major change that reli upon foreign capital and low level of domestic saving. And it's also a big change in trade. There was the end of the expansion of the frontier, the, uh, opening up of more and more areas that Pampers for growing wheat and, uh, raising cattle. So that expansion era has come to an end, but also, of course, there's a collapse in world trade more generally. And here we have, um, Argentinian exports and imports a percentage of GDP. And notice it goes down from about 80% of GDP before the war to about 20%. It's a massive drop in the level of trade. So the worldwide, uh, collapse of, uh, open trade European markets are closed off by protective tariffs, a drive to Auta. And Britain decides to opt for imperial preference buying crops from Canada and Australia, not from Argentina. But there's also a big difference in policy option, which goes on, which intensifies that difference. In Canada, in the 1920s, the leading liberal politician needed to have, uh, electoral support from, from farmers, try to encourage the exports, uh, build up the, the, uh, agrarian sector in Argentina. That was not so much the, the, the, the case where Uhgo, I, I mentioned is more reliant upon the support of urban voters in Buenos Aires and getting this, the radical civic union. These differences in state support and in the level of investment means a big difference takes place then in the quality of the produce. Canada pulled ahead both in the qual quality and the quantity. Canada is investing in better types of grain. It's better facilities, grading of wheat, preserving the quality, better marketing, uh, better elevators, which are owned cooperatively. So there's been a big difference in the two areas. And also Canada favored encouraging industry, which is exporting, which is able to do across the border, into the United States of America. That was not so easy for Argentina to do. Argentina turned to import substituting industrialization, try to encourage his own industries to replace imports from Britain and the United States. Now, I've been talking here about Argentina, I should say that, uh, every country in Latin America, all major economies in Latin America had the same problems. Same thing applied to Chile, which was an export of mainly nitrates and copper to Brazil with its coffee rubber. All of them were facing the same problems in interwar period. Those problems were, uh, fall in the terms of trade, the amount of manufactured commodities you could buy for a particular unit of export commodities. The price of export commodities dropped by about a third compared with the price of manufactured goods, which were being imported. The economies of Latin America were highly dependent upon trade, as I showed from the Argentina. So with a fall in the value of those commodities, and in the quantity of those commodities, it also hits the tax revenues because they relied upon, uh, the, the, uh, export, uh, duties on oddities commodities. So they're hit in their revenue. So all of this has a major impact Fall in the price of commodities fall into quantitative commodities. It's immediately going to hit the, uh, level of economy, of the economy. One response then is to devalue your currency. If you devalue the currency, you'd have to pay even more money to service your foreign debt. And the cost of servicing the foreign debt was as much as 70% of total government revenue in some countries in Latin America. So it's a really serious crisis, and a common response throughout Latin America and in Argentina was to turn from this export led growth to the import substituting industrialization developed local industries to replace imported manufacturers, often complimented by labor codes that gave a right to workers to unionize within incorporated system of conciliation boards, which represented workers, employers, and the state. That was a way of containing radical working class movements. But it was a way then of building its corporatist economy, which some people would see as being on the same lines as fascist Italy. People like Vargas in Brazil were particularly, uh, keen on building up this sort of system. So the political situation in the 1920s in Argentina and other countries in Latin America was unstable. Irrigation was forced outta the presidency, the radical civic union. I mentioned that he was leading split the old ruling elite makes of a turn. But there were continued threats from the anarchists, the emergence of the, the League of Republic ha based upon Italian fascism. So there's continuations throughout the 1920s of political unrest at this time of economic turmoil. The impact of the depression then led to an army coup in 1930 that removed the radical civic union from power and repressed the opposition. The leader of that coup in 1930 was part of a far right nationalist movement, uh, that it emerged even before the first World War. It's a far right group that opposed socialism, but also opposed liberalism. It supported the Catholic church and its hierarchy. The large landed estates expressed hostility to foreigners. It it wanted to regain land seeded to neighboring states like Uruguay, a aim to create an organic corporate society that would restore harmony between classes on the lines of the papal in cyclical, uh, var of 1891. So the, the general who launched a coup in a, in 1930 was part of that like far right, uh, movement. He was considered to be too far right, even by the other generals, uh, who replaced him, uh, in 1932 by a more moderate general, if such a thing as possible. And thereafter, the government was in the hands of a military oriented conservative elite with continued conflict with radicals and fascists. The 1930s has been called the infamous decade. In 1933, a treaty was reached with Britain to sell some commodities from the Pampers, the wheat and, and, and cattle to Britain. But at a very modest level, compared with what was coming from Canada and, uh, Australia, and with strings attached that Argentina had to buy British goods. Uh, the market had to be controlled by British merchants, by British firms in Argentina. So of course, that stirs up even more nationalists out. They outcry. A new central bank is set up to stabilize the currency, but it is under advice from the Bank of England. The government does introduce strict regulations to support prices to try and limit overproduction, because this can then lead to great rigidities in the economy. The currency is depreciated. High tariffs have introduced. So in pushing its import substituting industrialization, the market is being distorted high prices for capital, uh, com, uh, combined with like lack of investment. So there's again, this rather rigid, uh, system, which is not able to respond very well to, uh, what, what is happening during the 1930s, a trade war rising tensions throughout the world. In 1943, there is another military coup on behalf of the emergence of Peronism. After the coup of 1943, Peron became the minister for labor. He's, uh, an army officer. He worked with trade unions, and that led to resentment from his colleagues in the military hunter. He is working with the trade unions to improve the conditions it looks. If he's becoming too popular. He was dismissed and imprisoned, but then was released, uh, popular demand. And in 1946 was elected president. And of course, his wife Eva, uh, was highly popular and politically active. Power is really building upon the policies I was outlining of that if like far right. Uh, general I referred to came to par in, in 1930, and building upon import substituting industrialization, He was advocating a policy of social justice, economic independence, political sovereignty, designed to restore the moral and material greatness of Argentina. To kind a phrase, he wanted to make Arten Argentina. Great. It was an anti-capitalist populist nationalism. A third way as he saw it, between communism and the free market. The ideology is difficult to pin down. To sum, it was a form of fascism to others, it was a sort of left-wing populism to others, it was even something more of akin to Roosevelt's new deal. So peon had been part of the coup of 1930. He had some similarities with that ideology, i I outlined. But after he lost power in 1955, uh, before he regained power in 1973, he turned to the left. He supported Castro. He was well, he was welcomed by Catholic liberation theology. And Peronism has continued to be this rather difficult thing to pin down different ideological strands ranging from socialism to paternalistic conservatism. And you see there on the screen, some of the main principles that we just outline some of, some of them very quickly, is a true democracy is one in which the government does what the people want. It, it protects own into the people. It's of the common people. The elite is anti-people. It's only one class of persons. Those who work working creates the dignity of man. It's a duty is fair to produce as much as they consume. As Gates Volunteer Group two arms are social justice and social help justice and love to the people. It balances the right of the individual and society. It was a social market, puts capital to the service of the economy. It carries out social justice, which gives each person their rights in accordance to their social functions. It wants an Argentina, which is socially fair, economically free, and politically sovereign. We can see how that could be taken in all sorts of different directions. What did he actually try to do? Well, first of all, you have a five year plan of 1947 to 51. It aimed to increase pay, achieve full employment, develop industry, improve social welfare in close association with trade union movement. So a central feature was redistribution in favor of workers through subsidies, tax taxation, taxation of the rich fiscal deficits, uh, build, uh, investing through having, uh, uh, um, an unbalanced budget. How do you do that? Well, you use senior age. You print money, printing money leads to inflation. The average inflation rate from 1944 to today has been about 190% per annum. But companies were not allowed to adjust their financial statements to allow for higher costs. They were being taxed on the increase in the value, which is created by the government's inflation. This is what's called an inflation tax. Basically, the government was in, was, uh, taxing inflation, which it had itself created. And that, of course, is one of the key differences from Canada, Australia, where you don't have rapid inflation, where you do have a fair attack system and capital investment. What we're having here is a violation of property rights. Inflation is inflating away people's savings. Peron, although he is working with the trade unions, is also involving industrialists to a corporatist society. And he's particularly working with a man called Miguel Miranda, who formed a close relationship with Palon by running the state industrial bank. And the so-called National Post-War Council. What he was aiming to do was to close the gap between the rich and the poor, freeing Argentina from dependence on exports. What he was doing was taxing the export sector, these ranches to finance forced industrialization, but inefficient forced industrialization, nationalizing the British foreign owned transport companies, uh, utilities, electricity ports you see here on this publicity poster. But of course, that was app problem about how to pay for it and how did you pay for it. When Miranda's answer with the setup, the Institute for the Promotion of Trade, basically this institute bought all of the harvest and the cattle from the ranches at a low price, and then tried to sell it on the overseas markets at a large profit. That profit would then be reinvested in state sponsored industry and economic development. It would also pay for welfare schemes, higher wages to just to boost the domestic market. So obviously, those policies are going to be opposed by the landowners, and it was very justified suspicion that most of the money was actually going into Miranda's own pocket, uh, for his own personal advantage. Well, inflation this, uh, very expensive policy of nationalization so on, it was soon led the economy to collapse. Foreign reserves, which would be built up during the war, were used to pay for nationalization and to modernize the armed forces. The balance of payments deteriorated in order to industrialize. You need to import capital goods to build the new industries, but you don't have the, the, uh, uh, revenue from the exports. Very high level of devaluation of the currency workers were hit by falling wages by austerity. Uh, Miranda was dismissed in 1949. A second five year plan was introduced. We tried to show a little bit more concern for agriculture, but still there was inflation. Austerity need to increase taxes, unrest, opposition, and Peron was overthrown in 1955. A a period of social unrest, political unrest, violence follows with disorder between right and left. Peron briefly returned as present in 1973, but died in 1974 when he was succeeded by his wife, not either another wife. So what I want to pick up now is then what happens to this import substituting industrialization? Can anything be done to improve the situation? I'm just going to make two points here about what then happens to import substituting industrialization. And that is going to take me across the Andes to Chilean in two ways. The first is to go across the Andes to Santiago, to a body set up by the United Nations called the Economic Commission of Latin America. And the Caribbean clock, whose head was a man called Raul Pish, an Argentinian economist who had been head of the Central Bank of Argentina until he went into exile under Peron. He supported import substituting industrialization. But he said the solution was not purely nationalist. The solution, he said, was to change the whole structure of the international economy. He said the big problem was that collapsing the price of agricultural commodities or primary products like copper from Chile compared with manufactured commodities, that the whole world of economy was stacked against the, uh, the primary producing countries. They were getting to technological advance workers there got higher wages. They were, they were unionized. They could keep higher wages. Workers in the Latin American countries were not, didn't have such good bargaining power. The, uh, the country there didn't have such good bargaining power. What did to do was to work through a new body of which he became the head in 1964, unad, the United Nations Commission on Trade and Development. And the idea here was for international policy to force up the price of primary products against those of manufactured commodities to rebalance the world economy for distributive justice. Well, you can imagine what the advanced countries of the world in, uh, the World Bank, the, the general agreement of trade and tariff said about that, which was basically, forget it. So you, you have this, in fact, structuralist approach. Prish started to change his mind and said that, right, if we're gonna have import substituting industrialization and it's going to work, we need to have a common market for the whole of Latin America because individual nations are too small. We need to have a common market for Latin America, which he tried to sell to Kennedy when Kennedy was president in the United States. So there's a beginning of a, if a movement away from this sort of extreme nationalist peronism, there's more what was called, I call a structuralist approach. It doesn't, it doesn't really work because it's difficult to get the, the advanced countries of the dominating the international institutions to, uh, to accept, uh, that, that point. There's the office's modernist office of Ecla in Santiago, and there's Rob ish, uh, at the meeting, uh, at, at Ecla, putting these views forward. But also in Chile, you have, of course, another person, uh, Pinoche. And I think we need to understand, uh, what is happening there. Now, we start off, of course, with Hindi, uh, winning the election as, as a, as a socialist, um, until he is overthrown by Pinoche in 1973, whom he perhaps unwisely appointed as being the head of the Army Before the coup, the economy of Chile like that, of Argentina was in a mess. All imports needed. A license duties range from zero to 250%. There were 10 exchange rates for the currency. Importers had to make a deposit of 10000% of the value of imports while they were in transit. Uh, agriculture was hit by the high costs of, of, uh, equipment of fertilizers and exchange rates changing all the time, manufactured goods at a high level of protection. But the market was too small. They were very inefficient. In 1955, the State Department of the United States introduced the Chile project, which is a trained Chile economists at the University of Chicago, Theor, of course, for free market economics from the late 1950s within Chile. There's then a war of ideas. The Chicago boys were based at the, at the Catholic University. They favored free trade, and they argued against the economists at the University of Chile, who favored Pre's view, structuralist view to the Chicago boys import substitute industrialization. Structuralism led to inefficiencies. They argued for trade liberalization. They argued for devaluation of the currency to make goods more competitive. They argued for the abolition of price controls, which were related to rigidities in the market and inefficiencies. They argued for freeing up interest rates so that they would find the equilibrium and improve economic efficiency. Now, initially, they didn't make much headway, but in 1970, sorry, in 1970, they didn't, they didn't make much headway when they presented their case to the conservative presidential candidate who said, and I quote, get these crazy guys out of here and make sure they never come back. Well, they did come back. They came back under in opposition to ie. When Army offices commissioned them to write a report. It was so fat. It was called the brick. It was so, so big. And this brick argued that they should try to do the policies of opening up when I was overthrown. And PIO came, came in. Pinoche himself was a little bit wary because a lot of army officers were nationalists. A lot of industrialists, of course, did not want to lose their protectionism. But by after a few years of, of, of his government, he did decide to throw his lot in with the Chicago boys, against the nationalist officers and against the business people whose wealth rested on protectionism. He was convinced by Milton Friedman, who came on a visit in 1975, and he appointed, uh, Sergio Castro as minister of economics, the most senior of the Chicago boys. Now, I think that this, what they were introducing was not in fact Milton Friedman's type of outright doctrinaire neoliberalism. It was a more pragmatic neoliberalism. They wanted to combine the market and privatization and competitive in exports and foreign investment, but with a, some sort of a belief that the state should have a guiding hand, if not complete planning, then a sort of guiding hand over the, over the process. So it wasn't going to be like the outright free marketeer. It's going to try to reduce extreme poverty by targeted social programs. Reform of the pension system, for example. They stop the outright land reform, which I day was going in for, and encourage farmers to go crops like peaches, andicott, avocados, which could be sold to the north, uh, in the off season. They didn't want to go for complete and utter free trade. But some sort of a compromise between this. So the, the, the market has a role combined with decentralized planning. I think that that policy, which introduced was then continued very much after the return of democracy in 1990. Many of those ideas were continued both by Christian Democrats and by socialist governments in Chile, alongside improved welfare policies have been defined as inclusive neoliberalism. So the idea that there is a, a very like, simple Washington consensus of neoliberalism, uh, it doesn't seem to be quite right. Well, my conclusion then, this, pull out the main stories out outta this. As I said at the beginning, there was a 60% drop in Argent Argentina's relative income. Same thing happened in many other countries, but obviously Chile started to recover. Its some of its share in the nineties, from the 1970s and 1980s. Why was there this massive drop? Well, it goes back to the agrarian structure of larger states versus the small farm family farms of other settler societies. It's about the ownership of larger states being in alliance with British capital, and that British capital needed to cover low savings rates internally, but also lead to resentment more than other secular societies. When capital imports dropped, there was low savings, lack of investment inefficiency, uh, low productivity. The political system lacked stability. The autocratic power of the conservative elites led to opposition from socialist anarchist populist hostility to foreign control. Then it turned to import, substitute industrialization under Peron, the state policies limited growth, import substituting industrialization, distorted the economy with subsidies, controls, and tariffs. And that reliance upon inflation as a strategy of finance was destructive of property rights. Now, we could think back, if any of you heard my previous lecture on South Korea and Japan to what they did. Their governments were very clear that they should not be controlled by foreign capital, that they should build up a high level of domestic savings. Their states had a clear industrial strategy, but it was based upon exports in key sectors. Now, the question which is facing us now, facing Argentina now with its new president, is can Argentina break from its current po problems of, again, its position, but I don't think the prospects are very bright. Thank you. Thank you. Thank you, professor Dalton. Actually, to continue on that, on that question, someone is actually interested in, uh, following the, the recent, uh, IMF intervention. Uh, what does the future hold for Argentina's economy? Well, it still are very good at looking at the past and not so good looking at the future. Uh, I don't think the prospects look, uh, look, look very, very good. I think in, in a way, it's a continuation of the story that I've been been telling, um, uh, rapid inflation, uh, devaluation of the, of, of currencies. A flight of people, uh, away from Argentina. I was very struck, uh, this morning in the Guardian newspaper, a story which actually picks up what I was saying at the beginning, uh, about, uh, did you make the right decision in 1910 to migrate from Italy to Argentina? The story in The Guardian today is that a lot of doctors are leaving Italian doctors, uh, heritage doctors are leaving bu air used to go and work in Sicily, uh, because, uh, of the mess that the economy is, is, is, is in there. Um, I was just hinting there at the end about the new president in, in Argentina. Does he have the solution to, uh, what, what's going going on there? Uh, well, Malay is, um, I'm not sure exactly how to categorize him. One categorization is that he's a libertarian, um, economist, far, far right, you know, take, take controls of everything. It's even been described as an, as an, an arco capitalist, an arco capitalism. If you any of you read the, the book by Quinn ian Crackup Capitalism Mm-Hmm.<affirmative> is a way of in fact, hollowing out the state and, and creating areas of the o of economies, which are, uh, completely outside, uh, any sort of state, uh, control. Uh, so it's difficult to see exactly what he's, what he's doing. Uh, the situation in Chile is also very interesting. I referred to the pension reform in Chile, which in, in many ways it was a precursor of the sort pension reform that we've had with self-employed pensions and, uh, that sort of thing. Well, there's been riots in Santiago against the pension reforms, which are, are not delivering the sort of level of income, which is, uh, had been anticipated, had been promised. So, um, the, the prospects there were of Chile, which I was saying looked as if whatever one might think about the appalling behavior of, of the, of the government there, the economy did, did recover, and some of the policies were then followed up afterwards. It now looks as if that's hit the buffers. Uh, so, uh, I'm a bit gloomy. Sorry. Um, can I please ask you, um, um, there have been several things. You have mentioned, um, totally ignoring, um, the, the, the severe differences in all these Latin American countries, but there are several things you've said several times. First and foremost, can I correct you, Salvador A was not overthrown by Pinoche, Salvador A was murdered. The, the, the, the declassified documents from the Ccia A are clear, CIA involvement murdered in his palace last year. Several articles analyzed and mentioned that situation again, he was not overthrown, he was murdered in by posh. Um, you've said, you said twice, um, um, the danger of anarchist and socialism to the economy, and then you said again, um, um, hostilities to foreign control. I think what you haven't mentioned here is the enormous inequalities and the growth poverty that existed in all these Latin American countries, and that for centuries, it was the, the control of foreign companies. Yep. The, the, the capital, the the, um, um, cannibalization of the resources of the Latin American countries by Spain, Canada, America, with their companies that caused these economic instabilities in Latin America. You have c could you please say something about that? Right.'cause you have totally ignored that aspect of it. Uh, first of all, on IND, whether or not he was merged or committed suicide, I think it, the government was overthrown, it was replaced. So I I I don't see, uh, the, that, that I, no, we agreed that whether the government ended, what by whatever process, CIA was, was obviously involved, American corporation were, were involved. The government, uh, was, was overthrown. Um, I thought I had talked about the way in which, uh, foreign capital controlled and, and took out, took out profits from, uh, from the, this, the, these countries. Uh, it's not only true of what I'm saying in Argentina, it's true of, uh, uh, Chile, where the copper companies were owned by, uh, US companies. It's true of Hondura or whatever. Um, with, uh, United Fruit, it's true of Venezuela with, uh, with the, with the old companies, uh, uh, within a lecture, which is already too long. I can only, I thought I'd concentrate upon Argentina, where the ownership of British capital was obviously huge and was, um, uh, deeply resented. But it's different from, uh, Australia and Canada, where a lot of the money there went to the governments of those countries, which controlled it democratically. So there's, there's a difference in how foreign capital is, is, is perceived. So, um, I think I, I was making the point that, um, that you are making, I think we agreed that there was a lot of extraction from these, uh, economies, uh, which would've start, of course, under the, um, uh, previous, uh, imperial regimes of, uh, of the Portuguese Empire and the, the, the Spanish, uh, empire. So I don't think we're widely part on that. And of course, there's huge inequalities, uh, poverty within, within these, uh, within these countries. Um, so yeah, I don't, I don't think we're, we're actually disagreeing, Um, moving forward, actually. Um, someone is asking, did the, uh, the debt crisis experience in, in Latin, by Latin, uh, America in the early eighties, uh, contribute to the, to the ideological, actually consolidation of the Washington consensus that you described, or neoliberalism in general? Yeah. Okay. Um, so you're thinking of the, the 1982 debt crisis in, in, in Latin America then, and, and then subsequent ones. Um, I think that's a, a really interesting, um, story to, to be told. I think what's happening there is there's a huge flood of money going into the countries of central, um, America, of Mexico, Brazil, Argentina, Chile, uh, from money, which is produced by the, the old shock of 1973. So you have a huge amount of, of petro dollars, which need to be recycled. And whereas the period I'm talking about the foreign capital is going into these country largely through bonds, uh, and, uh, equities in companies, these, these petro dollars are being put by commercial banks, uh, into what a large authoritarian regimes. And, uh, Eduardo Alt, the University of Manchester is now doing a big project on the, the, uh, provision of this commercial capital for banks into authoritarian regimes. And some of it's actually quite astonishing, which plays to your point of the question, um, that people like Lloyd's Bank, the archives are open, uh, are saying, well, yeah, fine. Uh, it's great to lend these authoritarian regimes. They created stability. Uh, there might, people might be disappearing. They might be, but hey, this is safe. Uh, Nicholas Ridley, the conservative cabinet minister, uh, said, said words more or less to that, to that effect. Uh, and of course, um, mark Stacher, uh, was I think, um, supportive of Pina. She pina she sometimes seen as the beginning of neoliberalism. So, uh, I think that like financialization, that that, that, that movement of the banks back into this is a very important issue. But I think we also need to be a bit, a bit careful. Uh, the Washington consensus can be used as a catchall phrase of extreme neoliberalism. But the recent book by Sebastian Edwards, which is on the, um, the, the pin, the Pinoche government, uh, he was actually, uh, involved himself as part of, as, as, as an economist is saying that actually there were different strands of neoliberalism. Um, so he, he was saying that the, the Chicago boys from the, um, the, the Catholic University were pragmatic Neoliberals, mm-hmm, <affirmative>, and they were following, um, a somebody from the University of Chicago Harberger, who was not as rigid as Friedman. So I think that, uh, that the, that the new work on neoliberalism is trying to tease out differences within the, within neo neoliberalism. So, uh, Well, thank you very much. I think, I'm afraid we're running out of time, <laugh>, we're already more than 10 minutes past, I'm afraid. But I believe there's actually this conversation about the role of the state actually, um, is going to continue, uh, next year. Professor, uh, ton is, uh, coming back in the autumn, and, uh, he will talk about cities collective action versus private market in a series of three rather exciting, uh, lectures. Well, uh, please join me in, uh, thanking again, professor Martin.