World

Argentina's economic crisis is a “cautionary tale” for the US

If you think inflation is bad in the US, try living in Argentina. The country’s annual inflation rate now exceeds 70% – the highest in 40 years old. Monthly inflation (of just under 8%) is comparable to annual US inflation, with prices rising so much that the country’s central bank raised interest rates to 50,5%.

The only economic certainty for Argentines is that lots and lots of bills are needed to buy even basic household items. The same cut of meat can cost twice as much today as it did yesterday – and three times as much tomorrow. A two-hour domestic flight now costs the same as a month’s college tuition. A pair of sneakers costs the same as the minimum monthly Social Security payment, while a new iPhone can cost half a year to rent. Four years ago, football figurines of players like Lionel Messi (my favorite) cost 15 Argentine pesos (R$ 0, )). Today, they cost 150 pesos (R$5,44) – an increase of 900%.

In short, Argentina is starting to look like Venezuela – and no country wants to look like it.

How did things get so bad? The answer is quite simple: a government that loves to print money. For decades, government intervention in the Argentine economy has increased to the point that the state basically dictates the overwhelming majority of private sector activity, either directly or indirectly. Public sector meddling is notorious, eliminating the entrepreneurship, innovation and job creation that keep markets free and healthy. Although Argentina’s population exceeds 45 million people, only about six million Argentines are employed in the private sector, while 55% of registered workers in the country are employed by the government.

And public spending is gigantic. Last year, Argentina’s debt grew on average by almost US$3 billion (R$30,5 billion at current conversion) – half of 1% of the country’s total GDP per month. The Argentine economy – driven by US dollars due to the devaluation of the peso – is burning billions of dollars in foreign reserves every week.

Meanwhile, Argentina still owes US$ 40 billion (more than BRL 207 billion) to the International Monetary Fund since 2018, and the government recently made another loan of US$ 44 billion (more than R$ 2022 billions) of the IMF to pay off debts, increasing the risk of a future default.

My country’s history is one of excesses and fiscal irresponsibility. It is a story of entrepreneurs without incentive and replaced by government bureaucrats who recklessly spend taxpayer funds – only to raise taxes on private companies when those funds dry up. It has been this way for decades, and we are far from over.

Americans, now living in their own inflationary economy, should be on their guard. Argentina may be in a worse position than the United States, but it is certainly a cautionary tale to be heard by US policymakers seeking to increase government and stifle individual freedom.

If you follow the same path, before you know it, the market economy will dry up – and you will only have a useless Lionel Messi doll in your hands.

*ANTONELLA MARTY is Director of Public Affairs at Atlas Network.

©2022 National Review. Published with permission. Original in English.

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