THE ROOTS OF MARKETS & WEALTH

As I noted a few weeks back, from time to time I will post snippets from my book project, The Roots of Markets and Wealth, here on my blog. The goal is to have the book finished and shipped off to the publisher by the end of this month. The photo to the left is Juan Peron, president of Argentina from 1946 to 1955, and from 1973 to 1974.


... Soon after the Japanese attack on Pearl Harbor in 1941 “Argentina blatantly obstructed efforts by the United States to persuade the Latin American nations to break relations with the Axis” powers. Because of this and other Argentine activities, throughout World War II many in the United States believed Argentina’s war time neutrality was little more than political cover for deeper pro-Nazi sympathies. In line with these sentiments, statements made by Secretary of State Cordell Hull during WWII suggested Argentina was hiding German spies and escaping Nazis. U.S.-Argentine relations took a turn for the worse after 1946 when, in an effort to undermine Juan Peron’s presidential bid, the State Department issued a “blue book”. The book detailed collaboration and links between successive Argentine governments, the military, and the Axis powers.

Later, in 1948, the United States decided Marshall Plan dollars could not be used to purchase Argentine goods. The U.S. effectively punished Argentina by mandating American Marshall Plan dollars only be used on U.S. farm products and those of favored allies. The Agricultural Act of 1948 cemented these policy goals. Specifically, America’s “federal government would increase grain production by subsidizing American farmers and would finance grain sales in Europe” through the Marshall Plan. The impact was both immediate and devastating for Argentina. By 1952 Argentina’s share of world wheat markets dropped from 23 percent to 9 percent while the United States’ share of wheat markets grew from 7 percent to 46.1 percent. By the early 1950s not only were American grain exports to Europe eight times greater than before the war, but its global share of corn markets grew from 9 percent to an astounding 63.9 percent!

Denied access to “Marshall Markets” Argentina was forced to sell to smaller markets, which deprived them of needed dollars. While Argentina’s post-war problems were no doubt compounded by Peron’s populist policies, the decision to shut Argentina out led to lost market share, compounded their dollar shortage, and helped precipitate a balance of payments crisis. These dynamics undermined Argentine development and fomented civil unrest. Both would help force Peron from power and bring military dictatorship by 1955. Today, many will argue competitiveness and the logic of the market are sufficient to explain America’s post-war agriculture fortunes. The reality is quite different. Expanded market share after WWII also depended on U.S. military victories and the subsequent divvying up of the spoils of war – which speaks as much too economic nationalism as it does to free market competition.

- Mark