Argentina is known for its populists leaders, as well as spectacular economic booms and busts. Yet looking at the economic data of the last fifty years, successive governments have, perhaps somewhat surprisingly, run fairly traditional countercyclical public policies. Government spending generally increased during downturns and slowed during spurts of economic growth. As you can see in the graph below, this trend was more noticeable in the 1960s and 1970s, but continued (if somewhat lessened) throughout the 1990s and early 2000s.
This approach though has changed since the Kirchners (first Néstor, now Cristina) took office. Since 2003, and despite mostly good economic times, government spending has just grown, rising by almost 500 percent in absolute terms. In relative terms, the 2011 levels of 15 percent of GDP are the highest recorded over the past fifty years.
The government widely touts its new economic third way. But Argentina is also experiencing dollar shortages, capital flight, and rising inflation (at least unofficially). The question that remains is whether this government will be able to forge a new political path as well, and not be voted out when the coming rainy day hits.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.