What Americans can Learn from Argentina’s Infrastructure Spending
We were sixth in line when the banker came outside to address the long line which stretched down the street for half a mile. He spoke in Spanish, “we are all out of money, come back next week!”
I shook my head in frustration, wondering how we would buy food that week.
It was the third week in a row the bank had run out of cash. My friend and I could not use our American credit cards to purchase groceries and most stores in the tiny Argentine city did not accept cards of any kind anyway. We had already eaten what food we had left and used up our emergency cash.
On our way home, a stranger on a bike stopped us, gifting a loaf of bread and some fruit. A few days later, we were able to take money out of the bank. We felt very fortunate.
During the years 2014 to 2016, I lived in the poorest regions of Argentina to serve the people there. In 2015, at the end of Cristina Kirchner’s presidency, the Central Bank of Argentina’s reserves were depleted, and the country had the highest tax rates in its history. To curb inflation and economic collapse, some banks initiated small “corralitos” which restricted how much cash individuals could withdraw each week.
Argentina has suffered from economic stagnation for decades. 30% live below the poverty line. But in the early 20th century, it was the tenth wealthiest nation in the world. The average Argentinian was once as wealthy as the average American. What led the nation from being one of the world’s wealthiest to one of the poorest?
Of course, the answer is multi-faceted. But one major factor has to do with the rise of Peronism in the 1940’s. Populist power-couple Juan and Evita Perón led a new labor movement that drew from aspects of both fascism and socialism. One important centerpiece of Juan and Evita Perón’s regime was their focus on infrastructure.
Through his Five-Year Plan, Juan Perón nationalized airlines, railways, electricity, and oil. He built over 650,000 public-sector homes, 8,000 schools, and 4,000 healthcare facilities. But by transferring so many industries from private ownership to state ownership, Perón caused a series of economic crises in the 1950s and transformed the nation economically and culturally into a true democratic-socialist state.
Many Argentines still celebrate the Peróns, fully believing that economic woes can be solved through the Peronist approach: passing more infrastructure bills.
In 2003, the people elected a new Peronist power-couple: Nestór Kirchner who was eventually succeeded by his wife, Cristina Kirchner. While the Peróns may have had good, albeit misguided, intentions to improve their nation, the Kirchners can make no such claim.
Hidden in infrastructure bills, government officials received illegal kickbacks from public works projects. And because the Peróns had nationalized so many industries, the public had no real sense of how much new projects truly cost. Officials plundered their country without the public batting an eye because of the general acceptance that such projects are “just how you fix things”.
The scandal made headlines in 2018. It is estimated that the Kirchners may have made $3M each day from public works projects in their 12 and a half years in the public sector.
While government fraud does exist in America, I am not too concerned with American politicians receiving Kirchner-level kickbacks. Our government has more transparency, regulation, and competition between businesses lobbying for public contracts.
But I do worry when Americans become too permissive with what qualifies as “infrastructure”. As senior fellow Dr. Wayne Winegarden recently outlined, President Biden’s infrastructure package “spends only 16-cents on the dollar for infrastructure.” Or just $418 billion on actual infrastructure spending out of the $2.7 trillion proposal.
The infrastructure package plans to redefine broadband to nationalize the internet, it hides the Green New Deal in green energy initiatives, and addresses non-infrastructure issues like healthcare, poverty, and education. The package engages in corporate favoritism (which inadvertently creates technically privatized but actually nationalized industries) and expands bureaucratic oversight on industries unrelated to infrastructure.
President Biden’s American Jobs Plan does not go so far as President Peron’s Five-Year Plan to create democratic-socialism, but both rely on infrastructure to achieve their true agenda.
If Americans shrug at the idea of an 84% fat-filled infrastructure spending bill and turn a blind-eye to disguised initiatives, I suspect some ambitious politicians will enthusiastically push America down a path not dissimilar to Argentina’s. I’ve seen what lies at the end of that road firsthand: Americans should not stand for it.
McKenzie Richards is a development associate at the Pacific Research Institute.