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July 1, 2005
BOOK REVIEW: 'And the Money Kept Rolling In (And Out)' Scopes Out Argentina's 2001 Financial Collapse; Could It Happen Here?
Reviewed by David M. Kinchen
Huntington News Network Book Critic
Hinton (HNN) — A century ago, Argentina was one of the wealthiest countries in the world. It was attracting European immigrants, including many Italians, Germans and Jews of various nationalities from Eastern Europe, much as the U.S. was at the same time.
Argentina was – it still is – a major exporter of beef and agricultural products, contributing to a standard of living that some experts considered as high as or higher than that of the U.S. and many European countries: In 1913, Argentina had a higher per capita income than France, Germany, Italy and Spain. The era of prosperity ran from about 1860 to 1930, when a series of coups, dictatorships – including the Peron years – and a bloody attack on civilians by a military government in the 1970s and 1980s resulted in a decline that wasn't reversed until the 1990s.
This brief introduction is necessary to understand the 2001 financial meltdown of the South American nation of 38 million people with a land area of 1 million square miles. This is a sophisticated nation full of productive, well educated people, not a third world poverty hell hole.
"And the Money Kept Rolling In (And Out): Wall Street, The IMF and the Bankrupting of Argentina" by Paul Blustein (PublicAffairs, 278 pages, $27.50) tells how Latin America's most European country – fully 97 percent of its citizens have European ancestors – crashed and burned.
Taking his title from a song in the musical "Evita," Washington Post reporter Blustein ("The Chastening," a monumental account of the International Monetary Fund, PublicAffairs, 2003) tells in great detail how this nation, the second most populous – after Brazil – in South America – ended up in the club of basket cases, nations that defaulted on their debts.
Argentina, from about 1990 on did everything the World Bank, the IMF and the "brilliant" free–market economists said it should, the author says in this well–documented account that will appeal to policy wonks but is readable by a general reader. You might have to read it twice or three times, though!
The country in 1991 pegged its peso to the dollar's value, called convertibility. Blustein says the IMF was not thrilled with this prospect, but it worked for several years, bringing a period of stability and low inflation to a nation that had experienced hyper inflation on the order of that in post–World War I Germany, not to mention a divisive and bloody near civil war comparable of that in that era's Germany. The collapse, when it came in 2001, was similar to the dotcom bust of the same time and the implosion of Enron, World Com and Global Crossing, the author says.
From what I've read about Blustein's earlier book, I've reached the conclusion that he's no big fan of the unlimited globalization of finance. This is borne out by his comment early in the present book that "This engine [globalized financial capital] is remarkably powerful but volatile. Just as it would be unwise to put a fourteen–year–old behind the steering wheel of a Ferrari, newly developing countries are not always able to thrive for long with the wild ride of money moving freely across international borders..It is one thing to open a country to foreign goods and to investment in factories by multinational firms. It is quite a different matter to open it to the giant flows of international finance, which can be expansive and buoyant during some periods, timorous and flighty in others."
Could the collapse in Argentina happen in the U.S. and other giant economies? Blustein says the rules are different for relatively small economies and those of the U.S. and other giants. Still, Blustein points out there are "some unsettling resemblances to the U.S. situation in the story of Argentina's rise and fall. Most remarkable is the manner in which the flow of foreign capital into the United States has rendered its policymakers complacent about the nation's budget and trade deficits, just as buoyant global markets did in Argentina about the rise of its public debt. The reassurances often uttered by officials of the administration of .George W. Bush – that foreigners will continue to provide the funding the United States needs as long as the country remains a good place to invest – bear eerie similarities to the logic employed by Argentine policymakers."
Words of warning and wisdom indeed from a top–flight financial journalist in a book that deserves wide circulation.
Publisher's web site: www.publicaffairsbooks.com
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