Left not so honest with Macroeconomics either

Earlier this week NPR had a story about Argentina’s once abysmal economy roaring back with 8.5% annual GDP growth crediting the resiliency and innovativeness of the Argentine people in creating a booming export market. The individuals profiled were a boot maker with less than 10 employees and a member of a collective of seamstresses. Both had found relative prosperity in the foreign market for their goods. As I was thinking about what a great comeback story this was I heard the following which naturally made me suspicious.

"..Neighborhood assemblies, leftist parties and the militant students inspired us. I learned about Marx and Trotsky, and workers' control."

NPR is notorious for having a soft spot for leftist Latin regimes and frequently skew their reporting on economic issues based on the regime in power. For example continued emphasis will likely be placed on Mexico’s economic failure now that free market oriented Felipe Calderón is in power while successes are more likely to be featured for those with leftist leanings. This story is no exception and demonstrates cherry-picking in the tradition of Walter Duranty.

Argentine President Nestor Kirchner is highly regarded in leftist circles for replacing two right wing justices with women on the Argentine Supreme Court – one an Atheist no less – and rejecting the market liberalizing recommendations made by the IMF during the economic crisis. Instead of advancing policies making trade easier Kirchner is an unapologetic protectionist boasting:

"We had our own recipe," President Nestor Kirchner said last week, verbally thumbing his nose at those outside Argentina, such as the IMF, whose prescriptions he has rejected. "If we had followed ... the Fund and all the rest," he added, "we know how we Argentines would have faired."

What is that recipe? NPR would like us to credit the policies of this plucky Socialist but in reality they are little more than a speed bump to the colossal market forces projected by China.

Two years after hitting rock bottom, Argentina's economy is on the rebound.
Although the 10-month-old government led by President Nestor Kirchner has taken
credit, economists are praising the soybean — a small, round legume packed with
protein that is at the margin of Argentina's beef-heavy cuisine but at the heart
of its economy. Soybean prices have soared to their
highest levels since 1988, bringing in billions of dollars in foreign currency
and powering the economy's 8.7 percent growth last year. Taxes on soybean exports, meanwhile,
have been a godsend for the cash-strapped government, providing a huge chunk of
its budget surplus. In recent years, soybeans have swept
across Argentina's vast plains, replacing other crops and cattle to become the
nation's top export. The nation's once formidable
industry is still in ruins, and widespread unemployment in sprawling, urban
slums remains, but the small towns that dot the sparsely populated pampas are
bustling. An emerging group of soybean-growing
businessmen equipped with cell phones and sport utility vehicles is driving the
boom. They have amassed huge tracts of land, building expansive agro-industrial
operations that have begun displacing the region's gauchos and small-scale
farmers. But a growing chorus of economists, agronomists
and environmentalists is warning of the dangers of the soybean bonanza, which is
occurring to a similar degree in neighboring Brazil, Paraguay and Uruguay.
Never before has Argentina's agricultural production
been so concentrated in one crop, a tendency observers say is favorable only as
long as soybean prices remain high.
From sugar cane to coffee, monoculture
economies historically have spelled ruin in Latin America, as boom inexorably
has been followed by bust. In addition, Argentina in
recent years has become increasingly dependent on imports of other agricultural
products, from milk to potatoes. Agronomists, meanwhile, caution that the
expansion of soybeans is leading to deforestation and causing soil depletion as
many farmers neglect to rotate the legume with other crops.
Argentina is the world's third-largest soybean producer
behind the United States and Brazil. Most of the soybeans are exported to China
and other Asian countries, where they are crushed into a meal used as feed for

In short Argentina’s economy is a one trick pony being buoyed solely by China’s ravenous demand for cattle feed. Soybeans can grow almost anywhere and it won’t be long before much greater supply comes online, reducing soybean prices and reversing Argentina’s fortunes. When this happens I’m sure we can look forward to another hit piece on the perils of globalization rather than the short sighted protectionist economic policies of a socialist regime.

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