Thank Britain for why Australia isn’t Argentina

In terms of political style, there may be some truth to the comparison, given the self-described anarcho-capitalist, one-time rock star and ex-tantric sex coach’s colourful campaign promises to “burn down” the Central Bank of Argentina and take a “chainsaw” to government spending.

But there should be no doubt that the root cause of Argentina’s sudden embrace of right-wing libertarian populism is decades of political infatuation with left-wing populism or “Peronism”, named after postwar ruler Juan Peron and his wife Eva, immortalised in the musical Evita and the song Don’t Cry For Me, Argentina.

Mismanagement of public finances

Argentina’s current crisis is due to the Peronist mismanagement of the economy and public finances. To paraphrase Margaret Thatcher, having run out of other people’s money, it’s been forced to print its own.

With no access to global capital markets following the country’s third sovereign debt default since 2001 in May 2020, the leftist coalition government of President Alberto Fernandez ordered the central bank to print more pesos to finance the country’s chronic fiscal deficit and pay for its pandemic financial supports.

Without a politically independent central bank like Australia’s Reserve Bank, the peso printing has triggered the first outbreak of hyperinflation in three decades. With inflation running at 143 per cent and plunging the living standards of four in 10 Argentinians below the poverty line, Mr Milei’s victory margin in the presidential election’s second round run-off was the biggest since military rule ended in 1983.

His promised cure for inflation is “dollarisation”, or replacing the peso with the US dollar, which would outsource the country’s monetary policy independence to the US Federal Reserve and remove the option of politicians turning the money-printing presses back on to monetise deficits and debt.

However, with the peso’s value having plunged on the news of Mr Milei’s election, his cure for inflation would likely lead to soaring interest rates and a deep recession.

There is no painless way out of the current crisis for debt-laden Argentina short of some kind of major structural adjustment.

Differing cultural inheritances

With the central bank running out of foreign reserves to prop up the collapsing value of the peso, and with the country already dependent on bailout funding from the International Monetary Fund, another debt default amid higher interest rates and rising repayments is the highly likely outcome.

Scholars seeking the explanation for Australia’s continued rise and Argentina’s slide have pointed to the differing cultural inheritances from their respective Spanish and British colonisers.

Like politics, the rise and fall of nations is indeed downstream of culture.

However, saying a good word about the legacy of colonialism these days is a fraught matter, amid the rise of identity politics and efforts to balance the historical ledger by admitting the negative impact of colonial dispossession on indigenous populations, including Australia’s First Nations.

But that needs to be balanced by appreciating the positive legacies of colonialism if we are to properly understand the strengths of our own country.

The institutional and cultural foundations inherited from Enlightenment Britain after 1788 – which include parliamentary democracy, the impartial administration of the rule of law, and respect for the rights of the individual, including private property rights – explain why modern Australia isn’t Argentina, and ought to be celebrated as such.