Omaha, December 25, 2001 --  

Seven months before the economic crisis led to rioting in the streets of Buenos Aires, I sat in my comfortable train seat heading north from the Argentine capital. I'd already spent several days touring the city's sites, and had chosen to take a day trip on the refurbished Tren de la Costa. Completely revitalized as a public-private partnership during the 1990s economic boom, the historic train route passed through tony neighborhoods and seaside marina communities as it continued toward the nearby city of Tigre.

Each station had been completely rebuilt, partially restoring its historic character, but augmented with large amounts of retail space to create a series of mini-malls along the route, usually featuring North American chain stores and restaurants. For all its shine and newness, it was clear that there was something terribly wrong with this redevelopment project. Vacant storefronts abounded in the mini-malls. In some stations, virtually no tenants were left -- there were only empty shops and scattered remnants of the brief occupants.

The economic recession that has hit Argentina in the past few years clearly took its toll. But even without this blow, I couldn't help but question who could possibly think that this development would work. Why would affluent shoppers pay to ride for hours on a train just to be able to reach locations of stores that could be found closer to their homes? Why would tourists get off a train and visit shops that could be found anywhere else in affluent parts of Argentina or the world? Why would train riders elect to take this route when a much faster rail line serves the same communities just a few miles to the West? Even if consumers chose to do these things, would the revenue earned be enough to offset the enormous costs of restoring the railroad and building the malls?

Perhaps the investors who came up with the business plan for this project had answers to these questions, but I doubt that savvy people would find them satisfactory. And unfortunately for Argentina, the same can be said for countless other investments made over the past decade that critics now call Argentina's failed experiment with capitalism. But the half-hearted reforms and shady business deals that took place in Argentina in the 1990s can hardly be called capitalism. As in Russia, the old statist cronies simply dusted off their images to rebrand themselves as businessmen, taking a cut off the top of unsound deals as the passed their way.

Now, with scores of Argentines dead from rioting, the old-line Peronists have regained power, promising to end Argentina's so-called experiment with the free market. Their proposed changes? More aid from the United States, 100,000 new government jobs, and reductions on high-level government salaries and perks.¹

Such easy-answer ideas might win populist votes, but they are horribly destructive for the Argentine economy. It was wasteful international loans to the government that got Argentina into trouble in the first place -- partially by funding ridiculous public partnerships like the Tren de la Costa. Likewise, Argentina's inefficient and bloated government payroll helped produce unsustainable deficits that had to be financed through ever more International loans. And it was the unofficial corruption of government officers -- not the official perks -- that served as an anchor for the economy

Argentina's latest national tragedy should cause its countrymen great shame. Once one of the richest countries on the planet, Argentines seem utterly incapable of doing what must obviously be done to put their house in order. If Argentina is to regain its position among the rich nations of the world, it must cast aside its hopelessly misguided and corrupt leadership and seek to build a free and open economy from below. Only a new generation of Argentines, brought up with open-minded, globally-oriented ideas can hope to overcome the incessant misdeeds of their elders.

Notes:

1. Omaha World-Herald, "New Leader Outlines Plan to Fix Argentine Economy," December 25, 2001