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1 Australia and Argentina: A Study in Contrast In the last part of the 19th and beginning of the 20th centuries, Australia and Argentina experienced significant economic growth. By the early 20th century, both countries ranked in the top 10 in terms of income per capita. Studying the history of Australian and Argentine economic development, researchers found that they shared political, geographic, and economic characteristics and had followed similar paths, entering the international market as providers of rural goods. Economist Andrés Gallo notes that their shared characteristics were made-to-order for the globalization of the world economy that took place around 1900. “First, they had open grasslands apt for the development of rural activities. Second, low density of population permitted the generation of . . . surplus . . .rural goods for export. Third, settlement was easier . . . [because of low populations of indigenous peoples]. Finally, all these characteristics combined made the countries attractive to migratory currents from Europe. Furthermore, United Kingdom interests in these economies generated an important inflow of [capital] that accounted for growing shares of investments, mainly in infrastructure sectors like railroads and other transportation systems. (88-89) Study Graph 1* to see how Argentina and Australia fared in the first half of the 20th century. Answer the questions that follow. 2 Part I Graph 1* GDP Per Capita (PPP US Dollars 1985) 190 170 Index 1900=100 150 130 110 90 Argentina 70 Australia 19 00 19 02 19 04 19 06 19 08 19 10 19 12 19 14 19 16 19 18 19 20 19 22 19 24 19 26 19 28 19 30 19 32 19 34 19 36 19 38 19 40 19 42 19 44 19 46 50 The vertical scale on this graph is an index, a number that allows us to compare data from different economies. Since our concern is with economic growth, we don’t need to have the actual income data in Australian dollars and Argentine pesos. All we want to know is: “By what percentage did per capita income grow between 1900 and any year after that date?” We can do that by looking at the change in the index number. The graph starts at (x,y = 1900,100), meaning that, whatever Australia’s and Argentina’s per capita income was in 1900, we’re calling it 100%. Look at the data where X = 1902. Y for Argentina is about 106 and Y for Australia is about 102, meaning that per capita GDP in Argentina grew 6% since 1902 and per capita GDP in Australia grew 2%. 3 1. Write a generalization about economic growth that would be true for both Argentina and Australia in the first half of the 20th century. 2. Write 2 generalizations comparing or contrasting Argentina’s economic growth to that of Australia. 3. How much did GDP per capita grow from 1900 - 1946 in Argentina? __________ in Australia? ___________ 4. Find the following events on the X axis of the graph. Tell how each event affected economic growth in Argentina and Australia and speculate on the reason for that effect. Event Effect on Economic Growth Argentina Australia Possible explanation of that effect? World War I The Great Depression World War II 5. Predict. A. Based on the trend established in the first half of the century, what will happen to the economies of Australia and Argentina in the second half of the 20th century? B. Based on the trend established in the first half of the century, how will Argentina’s economic growth compare to Australia’s in the second half of the 20th century? 4 Part II Graph 2* GDP Per Capita (PPP US Dollars 1985) 300 250 200 150 100 50 Argentina Australia 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 1950 1948 0 This graph also uses and index to compare economic growth in Argentina and Australia, but note that the index has been reset to begin in 1948. Any changes from 100 are read as growth or decline in per capita GDP compared to what per capita GDP was in 1948. Look, for example, at 1960. Argentine income had was about 10% lower (the index is about 90) than it had been in 1948, while Australian income had grown about 15% (the index is about 115) since 1948. 5 6. If you predicted (as you’d be expected to), in question #5 that Argentina and Australia would continue to experience high rates of economic growth and that Argentina would continue to outpace Australia, this second graph is probably surprising. Estimate the % economic growth from 1948 - 2000: in Argentina __________ in Australia ___________ If a trend doesn’t continue, then the conditions that created the trend must have changed. The challenge for economists has been to explain what changed in Argentina and apparently did not change in Australia. 7. Study the timeline of selected events in Argentine history. Next to each event, draw an ↑ (up arrow) if you think the event increased the willingness of investors and entrepreneurs to get involved in the Argentine economy. Draw a ↓ (down arrow) next to the event if you think it discouraged investment and economic activity. 8. Study Graph 3. What is current Argentine GDP per capita? ___________ 9. What would per capita GDP be if Argentina had continued on the trend established in the early 20th C? _____ 10. Compare the graph and the timeline. What event disrupted the positive trend? 11. Try out your skills as a beginning economic historian. Based on the data you have, explain why Australia and Argentina entered the 20th century with the same rosy outlook, and ended the century so differently. 6 An Incomplete Timeline of Argentine History* Juan Peron released from jail. Takes control of military gov’t. Populists who oppose return to traditional Const. elect Peron President in Nov. 1946. House of Deputies impeach Sup. Ct. members who oppose Peron’s policies. 1853-Constitution established gov’t with Pres., 2-house legislature & independent Sup. Ct. ≈ 1910 1915 1920 1925 1930 1935 1940 1945 1950 Military coup ousts Peron 1955 Ongoing cycle of military / democratic governments Election fraud erodes citizen support for gov’t. Saenz Pena Law – extends democracy by adopting secret ballot & enforcing stricter control of voter rolls Liberal democracy with active political parties and reliable independent judicial system 1st military coup in Argentine history 9/6/30 – Sup. Ct. gave approval to coup, calling it a “triumphant revolution” – even before legal challenge could make its way through court system 11/35 – fraudulent gubernatorial and provincial elections run by Conservative gov’t. Supreme Ct. refused to intervene even when Electoral Board called for nullification. Military coup ousts Conservative gov’t. present Peron builds urban support by undermining prop. rts. of landowners in Pampas region. Sets up rent-control boards and won’t let landowners evict non-paying tenants. Peronists write new Constitution Remember that in the early 20th century, Australia and Argentina were in the top 10 in the ranking of world countries by GDP per capita. In 2004, Australia ranked 17th and Argentina, 71st (CIA World FactBook, 2004: http://www.odci.gov/cia/publications/factbook/rankorder/2004rank.html) Graph 3, below, projects Argentine income growth had the trends of the first half of the century continued. Graph 3* GDP Per Capita Argentina 13000 Argentina GDP per Capita 11000 9000 7000 Actual 5000 Fitted (No Break) 3000 19 00 19 05 19 10 19 15 19 20 19 25 19 30 19 35 19 40 19 45 19 50 19 55 19 60 19 65 19 70 19 75 19 80 19 85 19 90 19 95 20 00 1000 *All data in this activity taken from: “The Erosion of Rule of Law in Argentina, 1930-47: An Explanation of Argentina’s Economic Slide form the Top 10,” by Lee J. Alston and Andrés Gallo, June 3, 2003. Used with permission of the author.