Argentina Lessons Learned

The history of Argentina from the mid-1800s to today is a tale of two countries. It was the best of times from the mid-1800s to 1930, and it was the worst of times from 1930 to present. Our job is to manage investment portfolios to meet the financial needs of clients, and we strive to avoid talking about politics but have occasionally opined with our view on the ramifications of current or potential governmental policies. There are interesting examples of some weighty current topics in the U.S. policy discourse for which there is a relevant period in Argentine history. We thought to highlight these examples and allow you to learn more if inspired to do so. These periods in Argentine history help shape our estimations for how various types of businesses in the U.S. may fare better than others as the political and economic landscapes evolve.

Free Trade and Sensible Immigration Policy:

From 1870 to 1914 there was a long period of free trade and market integration, as steady immigration and capital flows created a trade boom that caused a convergence of commodity prices internationally. Furthermore, real wages in Argentina increased an estimated 50% during this period, and the standard of living for the working class increased substantially (della Paolera & Taylor, 2003, p. 124-126).

Our Take: Free trade and sensible immigration policy seemed to be very important contributors to overall economic growth and increasing the standard of living for all. We’ve written for years about the importance of population growth, both as a key input in economic growth as well as a signal that a country has rule of law and the ability to pursue happiness, which attracts others to move there. 

Market Integration and Stable Currency:

Argentina’s economy did well relative to other countries when its currency was integrated with other currencies, and it was strong or stable. However, a sound currency plan was only sustainable when associated with a sound fiscal situation (della Paolera & Taylor, 2003, p. 71).

Our Take: It is obvious but worth reiterating that sound fiscal policy is a crucial underpinning to everything financial. Without sound fiscal policy, Argentina’s systems were dysfunctional or effectively fell apart.  When a government keeps spending other people’s money, eventually the rest of the world will decide the currency is worth less and maybe worthless.

Wealth Redistribution:

It is estimated that during the period of 1800 to 1829 wealth was gradually redistributed away from elites towards skilled workers, and wealth inequality dropped considerably, though it remained quite high by today’s standards. This seems like a good outcome, but it set a dangerous precedent because during the period of 1835 to 1852, Governor Rosas gradually redistributed land and commercial assets to friends and allies, with the requirement that the beneficiaries of redistribution support the unquestionable political authority of Rosas (della Paolera & Taylor, 2003, p. 38). Redistributions of property and assets effectively created a constitutional crisis, and the concept of private property became codified, which helped set up a 70-year run of mostly prosperous growth (della Paolera & Taylor, 2003, p. 32-33).

Our Take: Wealth redistribution sounds like a laudable idea, but it is fraught with deep risks that could take generations from which to recover. Enforceable property rights are important for overall economic stability and growth that increases the standard of living for all. 

Independence of Financial Institutions and Businesses:

From the 1860s to 1920s, the Supreme Court of Argentina struck down regulations by the federal and local governments consistently upholding free market principles (della Paolera & Taylor, 2003, p. 16), and this period was “the best of times.” Throughout Argentine history, by and large, when the government decided that a certain industry had become too important, its attempts to get involved created problems and often the problems became serious.

For a couple centuries, there was effectively one bank in Argentina and a yoyoing of governmental involvement in that bank. When the government was overly involved, things did not go well.   

Our Take: Argentina’s history leads us to prefer investing in companies that operate in countries with much less governmental involvement and intervention in the financial system and central bank.

Innovation, Democracy, and Unionized Socialism:

Innovations in shipping and agriculture played important roles in the complex systems that resulted in doubling the cultivated land in Argentina from 1900 to 1905, and it doubled again from 1905 to 1915. This expansion continued until 1930, when it stopped (della Paolera & Taylor, 2003, p. 125).

Up to 1930, Argentina had enjoyed a seventy-year period of institutional stability with a representative political system in which governments were appointed by suffrage. In September 1930, constitutional order and suffrage were discontinued for the first time in the political history of the country. This happened again in 1943, 1955, 1962, 1966, and 1976. Elected governments reappeared in 1931, 1946, 1958, 1964, 1973, and 1983 to present (della Paolera & Taylor, 2003, p. 49).

Coinciding with the discontinuation of constitutional order was the rise of syndicalism, a specific brand of socialism that resembles Marxism in several dimensions. Syndicalism is a labor union movement that has the long-term goal of controlling the means of production and the economy at large through socialism. It seems that the spirit of syndicalism arose in Europe to oppose autocrats, capitalism, and social systems that forced most people to live in poverty or as indentured servants, which was adjacent to slavery (della Paolera & Taylor, 2003, p. 131).

One of the challenges of a broadly unionized labor force occurs during periods of high inflation. Labor wages are indexed to inflation, which helps create more inflation, and when the state is happy to allow inflation to reduce the real cost of its debts in the short run, the long run inflation can become unbridled. It seems that the energy of labor shifted away from innovation and productivity towards the goals of syndical unions.

Because “the administrative apparatus of the state did not reach a level of adequate proficiency. . . this, in turn, had two negative consequences. First politics developed a strong dependency on the state: not only public financing, but also the spheres, mechanisms, and means for bargaining and interaction were all somehow related to, if not totally manipulated by, the state.” Second was that the central state accumulated the bulk of political resources, so outsiders could not rise. The state enlarged itself through the creation of regulatory and consulting committees involving a myriad of economic activities, and most of them were created by decree (della Paolera & Taylor, 2003, p. 350).

Our Take: Without a continued focus on innovation and with ongoing constitutional crises, Argentina never fully developed into a completely mature domestic capital market, but it could have. The history of Argentina highlights what can happen when government participates directly as a capitalistic player (a la Fannie Mae and Freddie Mac) and becomes so big that regenerative political forces, that would fix or replace broken parts of the existing system, have almost no chance of gaining traction.

We fully support capitalism and yet we also support democratically elected officials to thwart the dimensions in which capitalism is, for lack of a better word, ugly. To paraphrase Ben Franklin, we in the U.S. have a republic but only as long as we can keep it. We will be applying lessons learned from Argentine history in assessing the viability of various business models in an evolving and complex landscape. 

Reference

della Paolera, Gerardo (Ed.) & Taylor, Alan M. (Ed.). (2003). A New Economic History of Argentina. Cambridge University Press.

(Access on Internet Archive site:  https://archive.org/details/neweconomichisto0000unse/mode/2up)

Redmond Asset Management, LLC October 2025

The opinions contained in the preceding commentary reflect those of Redmond Asset Management, LLC (RAM). The stated opinions are for general information only and are not meant to be predictions or an offer of individual or personalized investment advice. They also are not intended as an offer or solicitation with respect to the purchase or sale of any security. This information and these opinions are subject to change without notice. Any type of investing involves risk and there are no guarantees. Redmond Asset Management, LLC does not assume liability for any loss which may result from the reliance by any person upon any such information or opinions.

Redmond Asset Management, LLC is an independent, SEC registered investment management firm located in Richmond, VA and is not affiliated with any parent organization. RAM was founded in 2005 and registered with the SEC on December 22, 2005. The company offers investment management services for equity, balanced and fixed income portfolios to corporate, institutional, and individual investors.