Tuesday, November 8, 2011

Well it appears to be working.

Argentina. 10 years ago, as I understand it, it was a bit of a basket case, economically speaking. Now, not so much. Aha! I hear you say, another victory for unencumbered invisible hand of the free market and the Chicago school of economics. Again not so much. As with most articles from Salon, it's worth looking at this one critically (they have their biases), but it's worth a look.
Not so much on this blog, I often lament the lack of evidence based policy enacted by our governments. Admittedly, with economics, it's a hard thing to do given that on the country scale, economics systems exist within a large dynamic global economic system, so it's hard to isolate pieces of economic policy and determine their effect. When you're talking about broad school of though though, we can look at economies that approach either end of the spectrum and start making some general assumption. The spectrum I am talking about here, for the record is the highly regulated government controlled economy versus the completely unregulated free market approach. It's very rare that an economy actually reaches either end of the scale though the ones that are highly government controlled tend to military controlled and somewhat hopeless. Approaching the other end, the less regulation you get, the more emphasis is placed on the free market, the more inequality you get.
Presuming you're gunning for an economy that provides everyone with a baseline standard of living and that the Argentinian story over the past decade is a reasonable case study, then it would appear that what we want is not tight government control, nor overly loose control, but a moderate level of control. Their top 10% only owns 34% of the wealth rather than more than 40%. At the same time they've seen poverty rates drop form ~20% to 2.4%, which is spectacular. Salaries have grown with inflation and social spending increased.
This is not to say that everything is rosy. It's not, they've still got problems, government is always a balancing act though, like sailing a boat, you never get to take you hand off the rudder and say it'll be fine now. The idea that markets the less regulation a market has the better it will be for everyone is getting harder and harder to sell to the general population, which is as it should be, given it's failures over the past few decades. It would be nice if those trying to sell it would stop and look at countries that aren't toeing the line though. Figure out why they are working and push those policies rather than clinging to ideologies that don't work.

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