Don't Cry for Greece, Argentina

The Lessons from the Great Depression

Unemployed workers carry an Argentine flag at a roadblock protest during the first weekday of demonstrations after the government announced a $4.45 billion austerity plan March 19, 2001. Reuters

In the debate over Greece’s crippling economic crisis, no country’s past experience looms larger than Argentina’s. From Nobel Prize–winning economists such as Joseph Stiglitz and Paul Krugman, to money doctors at the International Monetary Fund (IMF), to the chattering classes in Europe and the United States, those looking for solutions to the Greek dilemma seem to be turning their gaze to the great depression that hit Argentina between 1998 and 2004. Lending credence to the Greek-Argentine comparison is that the structural causes and crushing consequences of the economic crisis in both countries bear striking resemblances. Indeed, anyone can be forgiven for mistaking one for the other.

A woman sits near a mural depicting a wrecking ball smashing a wall of austerity measures in Athens, July 22, 2015.
A woman sits near a mural depicting a wrecking ball smashing a wall of austerity measures in Athens, July 22, 2015.  Alkis Konstantinidis / Reuters
After years of reckless borrowing and spending by corrupt and incompetent political administrations—all enabled by international financial institutions—the Argentine economy went into a free fall in 2001. With GDP tumbling by almost 30 percent (the same as in Greece) and unemployment skyrocketing to nearly a quarter of the population, millions of Argentines were thrown into poverty. A run on the banking system forced the so-called corralito, or the government’s freezing of bank accounts, to prevent the country from running out of money. This, in turn, set off a wave of antigovernment demonstrations and riots across the nation that left 22 people dead and 200 injured. Hoping to defuse the situation, President Fernando de la Rúa fled the presidential palace by helicopter. He was the first of three presidents and at least five economic ministers who, in less than a year’s time, would try to fix the economy.

More than the crisis itself, though, it is Argentina’s robust recovery since the dark days that is enticing to students of the Greek economic crisis. By 2003, only a few years after the first period of economic contraction, the Argentine economy was roaring back. Between 2003 and 2012, the country achieved one of the longest periods of economic expansion in Argentine history, with GDP growth averaging 7.2 percent each year. In fact, for much of this period, Argentina

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