Canada and Argentina in the 20th century

Whenever I teach growth theory, I like to compare the Canadian experience with that of Argentina. Up until the 1930's, the two countries followed very similar paths: foreign investment financing the development of resource-based economies. But then the 1930's happened, and Canada and Argentina parted ways.

This is the best graphical demonstration that starting points are not destiny (the data are from Angus Maddison):

During the 65 years between 1870 and 1935, Argentina kept pace with Canada. Since then, Argentina's income per capita increased by a factor of 3, less than half that of Canada.

It's hard to see how that gap could be explained by anything other than the unhappy choices made by Argentina's political classes over the past four generations. Which makes me think that the answer to Dani Rodrick's question is a despairing 'yes'.

Update: Brad DeLong has just reposted his 1991 piece with Barry Eichengreen on the decisions Argentina took in the 1930s and afterwards.

Comments

[Theophilus]

MacKenzie King, Pearson, even Diefenbaker.
As a kid and young student I often thought, what a bunch of duds. How wrong I was. When they study the role of government in a successful country, Canada and Argentina are the bookends on the success failure line.

[Jim Rootham]

My eyeballing of that chart says the 2 critical things are WWII and the Generals capture of the government in the early 70's.

So, military Keynesianism and democracy are good things?

[E. Poole]

Those bad choices made by Argentina's political classes have enjoyed considerable popular support.

Unfortunately, neo-marxist populist resource management policies and right-wing, exploit-it-quickly policies tend to dovetail in the same tragedy of common wealth.

I love Argentina and look forward to returning one day but over the past 6 years in this rip-snorting commodity boom, I have studiously avoided buying resource companies active in Argentina. North Africa and the Middle East are viewed as safe by comparison. Brazil and Chile are also highly regarded.

For full disclosure I own shares in oil&gas and base metal companies active in Libya, Syria, Chile, Cuba and Brazil. I speak Spanish with an Argentine accent.

Note that the neo-marxist, anti-imperialist author who wrote the hugely popular The Open Veins of Latin America was Argentine. One wonders if Argentinians, Bolivians and others are still being driven by exploitive practices dating from the 19th century and early 20th century. I ask because our neo-marxist environmental activists here on the west coast of Canada appear to operate from an isolated bubble.

[joel]

Jim:
the "neo marxist" author you refer to is not argentinian, he is uruguayan. Anyway, that's a minor detail among other inexactitudes.

[joel]

sorry, that was for E poole

[michael]

THANK YOU!!!!!

[Allie Johnsom]

I don't care about the stupid politics in Canada, I'm doing a 10 page research paper on Argentina N0T Canada, so stop telling me things about Canada, thank you very much!!! You know what I'm NEVER coming on this stupid site again, thank you for ruining 10 minutes of my day!!!( really thanks D= (a lot!!!))

[Agustin]

Excuse me, i dont think our lack of development can be explained only by populis politics. From 1976 to 2003 Argentina´s GDP per capita didnt growth at all. Since 2003 it has grown more than a 50% under a "populist goverment".

By the way, poverty rate was down to 5% in Peron populist goverment in 1974, under washington Concensus it reached 57% in October 2002.

Until 1930 our development was based on Agriculture exports, after the crisis UK put limits to our exports, i think they gave preference to Canada and Australia for example. The obvious conclusion was a change in the economic model.

Wouldnt that be one explanation???

[jeff]

I hope Canada doesn't become the Argentina of the 21st century....
that would really suck.

We are at a tipping point right now.