Historical reflections on the splendor and decline of Argentina.

• Author: Hamilton, Jose Ignacio Garcia

The Argentine crisis has its origins neither in the economic reforms undertaken by President Carlos Menem in 1989 nor in the globalization process of the previous decades. Rather, Argentina's decline has been a slow process that began in the early 20th century. President Menem, in fact, based his economic reforms on sound economic logic: the privatization of state-owned enterprises, a monetary conversion ratio of one peso to the U.S. dollar, and a commercial opening to the world. In 1991, inflation--which had reached hair-raising figures--was curbed, and substantial GDP per capita growth was achieved in the following years. Despite these short-lived achievements, the economic situation deteriorated, and in November 2001 the government presided over by Fernando de la Rua decreed the partial freezing of bank deposits both in Argentine pesos and U.S. dollars. On December 19, supermarkets were plundered throughout the country, and the following day President de la Rua signed his resignation. Thereafter, the country had a succession of five presidents and declared the default of its foreign debt in an atmosphere of extreme economic, social, and political unrest.

Representatives of all political parties in Congress--in both the House of Representatives and the Senate--daily articles in newspapers, and the hoards of demonstrators who take to the streets of Buenos Aires, all attribute the present crisis to the liberal economic reforms carried out by President Menem, as well as globalization and the IMF intervention. In February 2002, in the streets of Dublin we saw posters displaying the map of Argentina with the following caption: "See what savage capitalista together with the IMF can do to a nation."

In this article, I argue that Argentina's crisis is the result of colonial political practices manifest in modern Argentine economics. I show that Argentina's amazing development after the 1853-60 National Constitution was due to the introduction of a series of institutions and cultural values that modified those stemming from Spanish colonial times. However, at the beginning of the 20th century--a period when, paradoxically, the country had become one of the richest in the world--there was a revival of certain cultural features of the colonial era that caused a process of economic decline. This decline was intensified after World War II. The reforms that started in 1989, rather than being the cause of our present situation, were unable to reverse the return to certain habits and features dating from colonial times. First, I explore the features that characterized Spanish colonial times. Then I refer to the modernization carried out after 1853, the subsequent regressions of the 20th century, and the reasons why the 1989 reforms were unable to stop the decline. I end with a reflection on the causes of those regressions and consider the prospects for the future.

Colonial Features

During the three-century colonial period, what is now Argentine territory was one of the poorest areas of the Spanish empire, largely due to its geographic placement, far from the centers of economic and political activity. In 1810, at independence, Argentina's population was smaller than that of Chile, Bolivia, Paraguay, and Peru, and its economy was underdeveloped relative to the rest of the Hispanic American territory. Though remote, the recently created Viceroyalty of the River Plate shared sociocultural traits typical of the continent dominated by Spain: political absolutism, mercantilism, disregard for the law, religious uniformity, xenophobia, and social stratification. Administration based on these cultural principles could only contribute to Argentina's underdevelopment, leading to bad government and abusive economic practices. Below I examine each sociocultural trait in turn.

Absolutism

One of the most striking features of Hispanic American society was absolutism. In 1492, when Christopher Columbus discovered America the Spanish monarchs were trying to consolidate their power over feudal nobility. America provided the ideal opportunity for the Spanish monarchy to impose its unlimited, absolute power. On this continent they could exercise their political prerogatives without check from the courts, feudalism, or local privileges. Nor was the existence of a native population any hindrance to absolute power. The Castilian monarchs were the "owners of America" in a political and economic sense. Clarence Haring (1972: 17) points out that the King exercised not only sovereignty over these lands, but property rights as well. He was an absolute power; every economic, political, or religious position depended on his will.

Furthermore, the weakness of local representative institutions helped to consolidate absolutism. The Hispanic American colonies had no opportunity to develop self-government or local democratic assemblies. The cabildos--early town councils established in Spain--had been democratic in the old Spanish kingdoms, but by the time America was discovered this institution had come under the complete control of the Crown, which appointed the members of the local assemblies. Indeed, in America the cabildos became aristocratic institutions, as members appointed their own successors. In addition, the Crown sold political positions. All these factors contributed to discredit these representative institutions (Zorraquin Becu 1981: 16, 310, 362; Bayle 1952: 622-23). Nonetheless, the large and corrupt bureaucracy set up in America actually imposed an important limitation to Spanish absolutism. Bureaucratic legal officials took advantage of the distance from Spain and the social environment of the land, solidifying their own power bases in the colony. In response to this threat, the Spanish Bourbon monarchy established in the 18th century a system of administrative reforms designed to reconcentrate power in Madrid and curb abuse by colonial officials (Halperin Donghi 1970: 53-56).

Mercantilism

Another characteristic of the colonial system in Hispanic America--closely linked to absolutism--was economic statism, or mercantilism. Mercantilism is understood as the permanent intervention of the state into the private lives and activities of its citizens. While absolutism was used as a means to consolidate Spanish unity, mercantilism was the instrument by which Spain tried to profit from the natural and economic resources of Latin America. From the start, no one was allowed to conquer or colonize territory in the Indies without explicit and previous permission of the Crown. Christopher Columbus was able to make his first voyage only after an eight-year struggle to get the monarch's sponsorship and financial support. Finally, in April 1492 the famous Capitulations with the Crown were signed. This agreement made Columbus only a Crown representative, with the conditional titles of admiral, viceroy, and governor of the territories he would eventually discover.

Mercantilism as a guiding principle was most remarkable as far as the distribution of land was concerned. Hence, the grant of encomiendas was always made by the Crown and was the main expression of the state's propensity to distribute privileges. The encomienda was an institution through which the Crown granted a group of native Americans to a Spanish conquistador, who was to proffer religious education. In exchange, the conquistador could make the natives work for his own benefit. Cheap labor provided by the natives was the most important wealth-generating factor in America. As these people were distributed by the King and his officials, it was very important to be on good terms with the latter, in order to take advantage of available cheap labor through clientelistic links. Essentially, economic success depended on access to the patronage system established by the imperial state. Every Spaniard in America wanted to have native Americans under his power. A letter written to the King by the Viceroy of Peru in 1597 flatly states that "Spanish men did not come to America to work, but to take advantage of Indian labor and lands" (Teran 1982: 134).

The Crown ordered that no encomienda should consist of more than 300 natives. In this way, successive monarchs tried to ensure an even distribution of native labor, and also that indigenous peoples be evangelized and protected. But this rule was not observed, and the conquistadors followed a general policy of concentrating wealth in the hands of a few. They often asked their relatives or friends living in the Iberian Peninsula to register encomiendas in their names.

Like labor, real estate was among the most important sources of wealth and prestige. The Castilian monarchs were the owners of American lands that had been granted to them by the Pope and conquered by their representatives. As a consequence of these rights, the Crown monopolized land distribution, and no individual had access to land without a Royal grant. Later, in practice the territories occupied by individuals without a title or a grant could be purchased by paying a sum of money or composition to the Crown.

In the first years of the American empire land grants were free, but in the 16th century Philip II started to sell them in order to finance his holy wars. Both systems coexisted until the end of the colonial period. The salient point is that whether the Crown distributed lands freely or sold them to obtain money, individuals always needed the consent of the monarchs--or their representatives--to buy lands (Mariluz Urquijo 1978: 16, 33-36, 50).

Mines were another factor of economic importance. In Spain, they had always been monopolized by the state. The 1387 Royal Orders of Barbiesca determined that an individual could prospect metals at private or public sites, but two-thirds of the profit obtained were to be given to the Crown. According to this law, all mines belonged to the Crown, regardless of whoever owned the land surface. This practice continued throughout the...