Sunday, 1 April 2012

A War between Two Unequals

Marching to different Goals
Tomorrow is the 30th Anniversary of the Argentinian invasion of the Falkland Islands, a windswept archipelago with a dusting of some 3000 inhabitants of British Descent in the South-West Atlantic. In the subsequent two and a half months, Britain regained control of the islands against a poorly defended Argentine invasion force. The conflict stood out in the Cold War Period in terms of its duration, intensity, and the concurrent Economic Histories of the two belligerents.

Argentina gained its independence from Spain in 1816; with British and French investment it quickly became a melting pot of cultures from Western and Southern Europe and the breadbasket of South America by the late 19th Century. Argentina, at the outbreak of World War I, was amongst the ten richest economies in the world. From then till the Falklands Conflict, Argentina was misruled by a series of Military Juntas and populist leaders like Juan Peron. It adopted a pan-Latin American economic philosophy of isolationism and self-sufficiency, known as Import Substituting Industrialisation (ISI), which brought economic stagnation and decay. No economy in economic history has seen long term catchup growth from the misguided rent seeking policies of ISI. With one possible exception: South Korea had a short term affair with ISI before it joined the East Asian bandwagon of Export Oriented Industrialisation.

Argentina since the Falklands Conflict returned to a sort of semi-Democracy. The governments, which followed, quickly switched to neoliberal economic policies which ultimately culminated into an ill-thought capital account sequencing of financial and industrial sectors; in turn, leading to the Dollarisation of the economy through a currency board with the US in the 1990s that ended into a Greek-style Financial crisis in 2001-02; worsened by faulty profligate government balances.

Argentina in the last decade, has been ruled by Nestor Kirchner and, then after his passing, his widow, Cristina Fernandez de Kirchner. Argentina is still the same misruled economy of the past century. Ms Kirchner has succumbed to the old ways; she has assaulted and trampled over the independence of the Central Bank, established draconian capital controls, brought back rent seeking monopolies, and reignited jingoistic claims over the Falkland Islands.

In contrast to Argentina, Britain moved on from the Falklands Conflict with a redefined sense of purpose. Her military was revamped, her Politics and Economy were solidified towards the legacy of Thatcherism, and her position in the World was reinvigorated to the heady heights it once had. The Falklands Conflict was a war between two unequals but which has left for both an enduring but contrasting generational legacy.