Fixing Greece Using the Argentina Model?

CEPR (Center for Economic and Policy Research) has published a report, “The Argentine Success Story and its Implications”, by Mark Weisbrot, Rebecca Ray, Juan A. Montecino and Sara Kozameh, about how Argentina escaped from a severe recession and crushing debt, using ‘unorthodox means’.

Until the end of 2001, Argentina had followed the orthodox advice of the IMF and the international economic community by pegging its currency to the dollar, and using monetary and fiscal tightening. the same austerity measures now being seen in Greece and other European countries.

At the end of 2001, Argentina defaulted on its debt and un-pegged its currency from the dollar. A quarter of contraction followed. Then, from 2002 – 2011, Argentina grew at 94%, the highest rate in the Western Hemisphere and among the highest in the world.

The Argentina economy has experienced

“this remarkable economic growth despite the default and difficulties
borrowing from international financial markets over the past nine years, and relatively little Foreign
Direct Investment (FDI).This should give pause to those who argue, as is quite common in the
business press, that pursuing policies that please bond markets and international investors, as well as
attracting FDI should be the most important policy priorities for any developing country
government.”

The report details the rise in several economic indicators, such as employment, economic equality, income among the poor, social spending, expanded reach of social programs, and a decline in poverty, and child and infant mortality.

The report should be read by anyone interested in the use of austerity measures and the use of defaults.

Paul Krugman says much the same, as does Dean Baker, both commenting on a NPR Planet Money segment. See also a Atlantic article on the same topic.