CIAO DATE: 03/03

The Argentine Implosion

The goal of this paper is to provide an explanation of the current Argentine crisis. While economic factors have played an important role in bringing the country to near collapse, the current literature has paid insufficient attention to the fact that economic policies are decided upon and carried out by politicians. In Argentina, political leaders indulged in old-fashioned clientelistic and corrupt activities, while multilateral lending agencies, foreign governments, and investors were looking the other way. Mainstream economic analyses still pay little attention to the role of politics and institutions. The matter is not just getting the right policy, but also, making sure the right policy is enacted by well-meaning politicians within an institutional environment where such a policy can bring the expected results. This paper provides more evidence to support the claim that political and institutional issues have been crucial in Argentina.

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