With Obamacare at the Supreme Court, the presidential primary debates in full swing, and the federal government’s continued unwillingness to liberate the economy and thus allow it to create jobs, it’s easy to forget that there’s a world outside America, one with its own economic issues and presidential elections.

Take Argentina, for example, a country near and dear to my heart ever since I studied abroad there nearly 15 years ago. A century ago, Argentina was emerging from oligarchic rule to an ever-liberalizing democracy that was one of the richest countries in the world. By 1930 it had the seventh-largest economy, outpacing fellow new-world ex-colonies like Canada and Australia and attracting waves of immigrants from Italy, Spain, and Eastern Europe. How did a country so rich in natural and human resources fall from that peak to become the butt of economists’ jokes?  (There are four types of countries in the world: developed, developing, Japan, and Argentina.)

The answer is the autarkic corporatism that came from the rule of Juan Domingo Peron, imposing an industrial policy that destroyed the burgeoning export-import sector, nationalized railroads, and gave unions all the power they wanted (so much that they even began clashing with Peron – sound familiar?). Combine that macroeconomic insanity—leading inevitably to social unrest and repressive government reactions thereto—with an idiosyncratic ”Third Way” foreign policy and redistributionist welfare schemes, and the jewel of Spain’s former empire came back to the pack of faltering Latin American states.

Wild populist swings of both the left and the right followed, interrupted only by a string of coup d’etats—I recall the syllabus of my Argentine history class read, “primer golpe de estado; segundo golpe de estado; tercer golpe de estado…”—resulting in a Dirty War between the ideological extremes that ended in the tone-deaf military triumvirate’s disastrous excursion in the Falkland Islands.  (Case in point: they thought President Reagan would support them over Thatcher’s Britain.) Democracy returned for good in 1983 but, save for a brief illusory period in the 1990s, Argentina’s economic house has never been in order. Recall that the country was a poster-child for hyperinflation in the late 1980s and even now inflation runs north of 20 percent (nobody knows for sure because the official figures cannot be trusted).

After an economic crisis of Great-Depression proportions (labeled simply La Crisis) in the early 2000s gave the country an extremely painful but long-needed correction—unpegging the peso from the U.S. dollar among other long-needed reforms—an accidental president from the south, Nestor Kirchner, began reimposing his brand of Peronism. This included defaulting on sovereign debt, government control of the energy sector, expanded social programs, and rapprochement with the likes of Venezuela’s Hugo Chavez. Deciding not to run for reelection, Kirchner handed the presidency to his wife, Cristina Fernandez de Kirchner, who essentially continued his heterodox policies while governing with an increasingly heavy hand against protestors and the media.

A few weeks ago, Argentines overwhelmingly reelected Fernandez, easily beating back opposition groups that never coalesced into a single movement or candidate. This result wasn’t surprising because the economy is expected to grow by eight percent this year and the middle class has largely recovered from the crisis—though most economists consider the current situation to be unsustainable, with the country eventually headed to a reckoning akin to the one it faced at the end of the ’90s (recall the tragic cycles the country endures).

Argentina provides America a “teachable moment,” to use one of our president’s favorite expressions. Like Argentina has been many times over the last century, the United States is at a crossroads. Will it continue to stand for individual liberty, innovation, and social mobility, or will Americans trade their freedom for ever-larger entitlements and evanescent protections from life’s vicissitudes? As Mary Anastasia O’Grady wrote in a column that we can only hope fails to be prophetic:

On this, the experience of Mrs. Kirchner’s Argentina is instructive. It abandoned free markets, ostensibly in the interest of social justice. The predictable result has been greater injustice, more poverty, and increasing concentration of wealth and power in the hands of the political class and its friends. Efforts to make the economy competitive have repeatedly been defeated even as the standard of living declined.

Argentina tests the theory that democracies have a built-in capacity to correct the overreach of government. Not only has it been unable to extricate itself from the black hole of corporatism, it is getting sucked in further.

Or, as Cristina Fernandez put it on the eve of her reelection, “I don’t know if Obama has read Peron, but let me tell you, it sure seems like it.”

[Not coincidentally to the timing of this blogpost, I will be in Argentina all next week, a working vacation of sorts.  I'm currently scheduled for two public talks: in Buenos Aires on Nov. 24 at 7pm at the business/economics university ESEADE on the topic of rule of law and economic development and in Tucuman on Nov.25 at 6pm at the Catalinas Park Hotel at a conference marking the 20th anniversary of the fall of Soviet communism, sponsored by the think tank Libertad y Progreso. Both events will be in Spanish.]

Cry for Argentina is a post from Cato @ Liberty - Cato Institute Blog

Rumors abounded this weekend about Hugo Chávez’s apparent critical health condition. The Nuevo Herald reported that the Venezuelan president could be suffering from prostate cancer. On June 9, while visiting Cuba, Chávez fell ill and was treated for a “pelvic abscess.” Since then, the loquacious caudillo, who for over a decade has flooded Venezuelan airwaves with endless TV addresses, has been conspicuously out of sight. All we have is a picture released to the media showing a frail Hugo Chávez holding onto Fidel Castro (aged 84) and his brother Raúl (aged 80).

Speculation increased on Saturday after Nicolás Maduro, Venezuela’s Foreign Relations Minister, said that Chávez was waging a “great battle for his health” while admitting that he wasn’t doing well. But perhaps the most ominous statement came from Chávez’s older brother, Adán, governor of the state of Barinas, who warned yesterday that supporters of the president should be ready to take up arms to defend his revolution. “It would be inexcusable to limit ourselves to only the electoral and not see other forms of struggle, including the armed struggle,” said the elder Chávez.

This is where things can get extremely ugly. Nobody knows what could happen to chavismo without Hugo Chávez. Many people expected Chávez to resort to violence next year in case he lost his reelection bid (a real possibility given popular discontent due to rising food prices, food and energy shortages, and increasing crime). This is why he created a socialist militia with tens of thousands armed civilians bent on “defending the revolution” no matter what. Also, Chávez promoted General Henry Rangel Silva as head of the Armed Forces after Rangel stated that the army would not allow the opposition to win the presidential election in 2012. However, in all these scenarios, Chávez was always the one calling the shots.

If Chávez passes away or is permanently incapacitated, the question becomes: Who will take over Venezuela and his political movement? The Constitution requires the Vice-president Elías Jaua to be sworn it as president. However, it is very likely that Chávez’s absence will open a fratricidal struggle within the ranks of chavismo for the control of government power. During his 12 years in office, Chávez has diligently made sure that no apparent successor takes the spotlight. Caudillos don’t have real VPs, a situation that could lead to chaos if the caudillo dies while in office.

A historical parallel can be drawn with the passing of Juan Domingo Perón in Argentina in 1974. His wife, Isabel, was his Vice-President and she took over the presidency after Perón’s death, as required by the Constitution. However, her tenure was marked by the increasing violence of the “Montoneros,” a radical left-wing terrorist group that claimed to uphold the leftist legacy of Juan Domingo Perón. The situation reached a critical point when the Armed Forces deposed Isabel Perón with a military coup in 1976 and led a “Dirty War” against left-wing elements of society that resulted in the killing and disappearance of approximately 30,000 people in 7 years. Perón’s death and lack of a viable successor led to chaos and slaughter.

The driving force behind the different forces within chavismo is graft, not ideology. As Gustavo Coronel documented in a paper published by Cato in 2006, corruption is rampant in Hugo Chávez’s Venezuela, and it permeates all levels of government, including powerful elements of the military. It is unlikely that those who have been enriching themselves in the last 12 years would call it quits if their leader passes away. A violent struggle could therefore ensue within the ranks of chavismo for the control of government.

Venezuela’s democratic opposition movement should play its cards carefully. If Hugo Chávez dies or is incapacitated, the opposition should demand that the Constitution be respected and Vice-President Jaua take over until next year’s presidential election. The international community, and in particular the Organization of American States, should also be assertive in stating that Venezuela would face international diplomatic ostracism (e.g., expulsion from the OAS, travel ban for regime leaders, freezing of their bank accounts, etc.) if elements within the government stage a coup or try to stay in power through armed struggle.

We will know the gravity of Hugo Chávez’s health condition by July 5th. He had called for a big international summit that day to celebrate Venezuela’s bicentennial anniversary. If he calls off the jamboree, or if he is absent, it will signal that his health has very likely gravely deteriorated, and speculation about his succession will be overwhelming.

Après Chávez, le Déluge? is a post from Cato @ Liberty - Cato Institute Blog

Argentina’s power couple (President Cristina Fernández and her husband and former president Néstor Kirchner) took their fight against the country’s major newspapers one step further today when the government released a report that might ultimately give it control of the company that distributes paper to the newspapers.

The government report targets Papel Prensa, a private company that belongs to a group controlled by Clarín and La Nación, Argentina’s major daily newspapers, and that distributes paper to 170 newspapers all over the country regardless of their editorial line and ideology.

The government claims that the previous owners of Papel Prensa sold the company back in 1976 under pressure from the military junta that then ruled Argentina. The report says that the government will sue the board members of both newspapers for “crimes against humanity” and “illegal purchase” of Papel Prensa. It also brings up charges of financial irregularities and unfair competition in the distribution of paper.

Both Clarín and La Nación vehemently deny the charges, pointing out that in the 27 years under democratic governments, Papel Prensa has never been impugned in the way it was acquired back in 1976. They claim this is a plan from the Kirchners to take over the company, and thus extend government control over the distribution of the newspapers main input: paper.

This is not the first time that the government has targeted Papel Prensa. Two weeks ago, the Commerce Secretary, Guillermo Moreno, stormed the company’s board meeting wearing boxing gloves and a helmet, shouting “you won’t vote here.” Last Thursday, Moreno, along with 10 others, broke into the offices of Papel Prensa shouting “I’m the owner” while trying to take over offices and desks.

Even though they no longer control Congress, the Kirchners have found a way to get what they want largely because of the divided and weak opposition. However, they might be pushing the envelope in picking such a contentious fight in a country where freedom of the press is still valued.

The Kirchners Go After the Newspapers in Argentina is a post from Cato @ Liberty - Cato Institute Blog

La Nación of Argentina reports today [in Spanish] that—shocker!—the Argentine government used funds from the nationalized pension funds to finance its current spending.

Let’s remember that over a year and a half ago, the administration of Cristina Fernández announced the nationalization of the private pension funds—$30 billion worth of assets—under the claim that the international financial crisis threatened to wash away the retirement savings of Argentine workers. However, it was clear from the beginning what the government’s real intentions were, especially since a surtax imposed on farmers had just been repealed by the courts and defeated in Congress.

Even Argentina’s populist hero, Juan Domingo Perón, warned 35 years earlier about a similar move from the government as Ian Vásquez pointed out in late 2008.

How Come We Didn’t See This One Coming? is a post from Cato @ Liberty - Cato Institute Blog

Following in Mexico’s footsteps last week, the Supreme Court of Argentina has unanimously ruled today on decriminalizing the possession of drugs for personal consumption.

For those who might be concerned with the idea of an “activist judiciary,” the Court’s decision was based on a case brought by a 19 year-old who was arrested in the street for possession of two grams of marijuana. He was convicted and sentenced to a month and a half in prison, but challenged the constitutionality of the drug law based on Article 19 of the Argentine Constitution:

The private actions of men which in no way offend public order or morality, nor injure a third party, are only reserved to God and are exempted from the authority of judges. No inhabitant of the Nation shall be obliged to perform what the law does not demand nor deprived of what it does not prohibit.

Today, the Supreme Court ruled that personal drug consumption is covered by that privacy clause stipulated in Article 19 of the Constitution since it doesn’t affect third parties. Questions still remain, though, on the extent of the ruling. However, the government of President Cristina Fernández has fully endorsed the Court’s decision and has vowed to promptly submit a bill to Congress that would define the details of the decriminalization policies.

According to some reports, Brazil and Ecuador are considering similar steps. They would be wise to follow suit.

Argentina Decriminalizes Personal Drug Consumption is a post from Cato @ Liberty - Cato Institute Blog

Mary O’Grady writes in today’s Wall Street Journal on the Kirchners’ threats to press freedom in Argentina. Unfortunately, the attack on free expression is part of a worrying trend that is intensifying in some of the region’s populist countries. For more, see Gabriela Calderón’s post on Ecuador here; and my posts on Ecuador and on Venezuelan President Hugo Chávez’s efforts to close down Globovision TV here and here.

The Populist Assault on the Latin American Press is a post from Cato @ Liberty - Cato Institute Blog

According to the Argentine daily La Nación [in Spanish], the World Bank warned yesterday about “corruption, money laundering, inflation, indebtedness and nationalizations in Argentina.” Then the WB went ahead and approved a series of loans to the country for approximately $2 billion.

The Argentine minister of Labor said that the credits were “a good sign of confidence” by the World Bank on the country.

World Bank Criticizes Corruption in Argentina, Then Awards its Government $2 Billion is a post from Cato @ Liberty - Cato Institute Blog