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Workers Socialist Review

Magazine of the Workers Socialist League
Affiliated to the Trotskyist International Liaison Committee

Written: 1982.
First Published: September 1982.
Source: Published by the Workers Socialist League.
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Workers Socialist Review
No. 2, September 1982

Argentina and the world economy

By Bob Sutcliffe

The current debate on the British left about whether to support Argentina in the South Atlantic war has raised important questions about the role of Argentina within world capitalism.

Some who argue for supporting Argentina contend that, since it is an oppressed, semi-colonial nation, its fight against an oppressor, imperialist nation, Britain, must be supported regardless of the political nature of the military regime.

On the other hand, some of those who believe that socialists should condemn the war and argue for defeatism on both sides have argued that Argentina is not a semi-colonial nation.

In the context of this debate, therefore, the nature of the Argentinian economy and its relation to the world economy has become a controversial issue. And it produces a need for discussion of modern imperialism.

The main purpose of this article is to present and analyse the known historical and contemporary facts which might help to clarify these questions.

Its subsidiary purpose is to argue that, even if the nature of the Argentinian economy could be clearly established (which I believe it cannot in terms of the categories of the debate), this would not be decisive in settling the dispute about whether or not to support Argentina.

At the end I shall summarise the reasons why I personally believe socialists should give no support to either side.

The rise of Argentine capitalism: 1870-1929 . . .

Back in the 16th and 17th centuries when beef was neither corned nor refrigerated and when the plunder of gold and other treasures was the basis of conquest, the land which is today Argentina was a neglected outpost with few inhabitants, settler or indigenous.

Only with the exodus of Italians and Spaniards in search of land and livelihood in the later 19th century did the Republic of Buenos Aires and then Argentina become economically significant. Between 1857 and 1930 Argentine received 6,296,300 immigrants, 78% of them from Spain or Italy.

In the 40-50 years before World War 1, Argentina’s development was prodigious. A well-known economic historian has said that at that time “Argentina witnessed one of the highest growth rates in the world for such a prolonged period of time”. [1]

The growth was primarily based on rapidly expanding export markets in Europe first of all for wool and hides, then for wheat and finally, with the advent of maritime refrigeration, meat.

Between the late 1860s and the onset of the Great Depression in 1929, Argentina’s population grew from 1.7 million to 11 million. Its area sown with crops grew from about 580,000 hectares to over 25 million hectares. Its railway network from 503 miles to over 38,000. [2]

Although primary agricultural exports were the foundation of the expansion, Argentina also experienced considerable industrial development which was closely linked with rural growth.

By 1930 nearly a quarter of the labour force worked in the industrial sector, many of them still in industries closely related to agriculture.

Much of the capital which financed Argentina’s growth was, of course, not local but came from the advanced imperialist countries, especially Britain.

In 1900 long-term foreign investment in Argentina amounted to $1,120 million; this was 32% of the fixed means of production in the country.

By 1913 foreign investment had risen to 48% of the total, an enormously high proportion. After the war it fell back again to 34% in 1927 (worth $3,474 million).

The largest investor by far was Britain. In 1900 its share was 59%, a proportion it maintained until World War 2. Up to then between one-third and a half of the investment was in railways and another third in government bonds. [3] This was a typical pattern of 19th and early 20th century foreign investment similar to that in the USA, Australia, Russia and other countries. (See Table 2).

In the period after World War 1 growth and foreign investment continued but at a lower level as a result of the problems of the world economy.

Nonetheless one basic pattern of Argentinian development was maintained from 1860 to 1930: a relatively open economy, participating in the rapidly changing world division of labour by specialising in a few primary products (meat, grain and linseed) for which world demand was strong and at the same time beginning a domestic industrialisation. Foreign capital and foreign trade were both very important: exports and imports were each worth over a quarter of the value of GNP; between one-third and one-half of capital was foreign owned.

There is controversy among economic historians as to whether in terms of income per head Argentina was ahead of or lagged a little behind Australia and New Zealand in 1900; but the pattern and speed of development of the countries was very similar up to 1929.

Argentina was one of the few countries of the capitalist world outside of Europe and North America enjoying the status of an economically advanced country. It was one of the 12 richest nations in the world. By and large, up to 1930 Argentina, like Australia, was being developed rather than underdeveloped by world capitalism. It was not, however, a significant imperialist power in the sense that its bourgeoisie did not play a politically important or independent role on the world political stage.

Australia went on to keep up with or overtake the economically advanced countries of Europe and North America while Argentina did not. The reasons for Argentina’s later failure have been analysed a good deal less than those for its earlier relative success.

. . . And the decline

Some economists date the dividing of the ways long before the Great Depression of 1929. Andre Gunder Frank, for instance, concludes that Argentina first “missed the economic boat” in the late 19th century: “Between 1880 and the First World War the relative weakness of the working class and labour movement relative to the export interests led to excessive agricultural export orientation instead of industrial protectionism. Thus Argentina never realised the “Australian model” of development (for which it had certain advantages over Australia) and missed the boat in its direct competition with Australia. (In Australia the relative strength of the working class imposed a much more protective infant industry policy on the agricultural interests). The result was that the development of Australia, with only half the population of Argentina, has far outpaced that of Argentina since then”. [4]

Even if there is some truth in this, the evidence still suggests that the growth of Argentina’s national income per head was ahead of Australia’s until 1930.

Some of the decisive reasons for the setback to Argentina’s development, therefore, must be sought after the onset of the Great Depression.

Paradoxically this period is always pointed to as the major period of Argentina’s industrialisation. The country’s primary exports were cut off by the depression and so this forced Argentinian capitalists to seek out new souces of profit.

At the same time the worldwide collapse of industry meant that Argentinian industrialists had less competition to face. In any case the government began to raise a high tariff wall around Argentinian industry. Argentina, however, unlike Australia, was excluded from the discriminatory trading blocs into which the post-1929 world was divided, though it made some trade agreements with Britain, for instance.

The protectionist policy was maintained through World War Two when the situation was improved by a boom in primary exports as well. By 1945 it had “produced an important industrial bourgeoisie and working class and petite bourgeoisie“. [5]

The old agricultural exporting interests lost political power to the benefit of the growing national industrial bourgeoisie and the strengthening, organised working class – two potentially antagonistic groups who could be temporarily allied only through industrialisation, protectionism and political nationalism.

Argentinian exports – growth and composition.

Total exports 1875-79 1900-04 1925-29
(Index 1875-79=100) 100 391 *
Percentage composition
Wool 52.9 22.0 8.2
Hides and skins 38.1 11.2 8.1
Meat 8.2 7.7 15.4
Wheat and corn 0.7 35.1 40.7
Linseed nil 9.5 12.2
Others 0.1 15.5 15.4

Source: Diaz Alejandro, pp. 5 and 18.
* = not available

It was on the basis of such an alliance that Peron and his followers built his nationalist, populist regime from 1945 until 1955. It remains today the strongest latent force in Argentinian politics. The various military regimes from 1955 to 1973 were all obliged, like it or not, to continue the protectionist, nationalist policies of Peronism in order to placate the dominant forces in Argentinian politics.

During this whole period Argentina retreated from being an open economy with high penetration by foreign capital towards relative autarky.

Exports and imports had both been over a quarter of the GNP in the early part of the century. Since 1940 they have been well under 10%.

The total value of foreign private investment was $3,136 million in 1913; withdrawal of capital and liquidations in the Great Depression had reduced it to $2,580 million by 1940.

Peron’s nationalisations of the 1940s and further withdrawal of capital cut it to about $1,255 million by 1949. There it stayed until a sudden and short build-up in the early ’60s to send it up to about $1,800 million by 1965.

Over the next ten years of political upheaval some foreign capital entered Argentina on the one hand (mainly to buy up existing firms for petroleum production) while capital left moribund industries on the other hand. So by 1975 the total had only been raised to $2,000. [6]

The claim made in a recent article in The Militant (weekly magazine of the Socialist Workers Party in the United States) that “the reason for the gap between [Canada and Argentina] is explained by the principal difference between them: Argentine economic development has been deformed and distorted by the predominant role that foreign capital has played in the development of industry, and by the fundamental influence that imperialist companies exert on the Argentinian state” [7] is, therefore, extraordinarily wide of the mark.

One of the striking features of the last 50 years of Argentina’s development is in fact the extremely small amount of foreign investment which has taken place. The real value of foreign owed capital in Argentina today is far less in absolute terms than it was in 1913! In 1955 foreign capital was only 5.1% of total capital stock, and it cannot be much higher than that today. [8]

About 1,000 out of Argentina’s 133,000 industrial firms are foreign-owned.

Foreign Investment in Argentina.

1913 1940 1949 1965 1975
Total value of foreign capital (US $m) 3,136 2,580 1,255 1,800 2,000
Percentage of total capital stock 47.7 20.4 5.4 * *
Share of
USA 1 20 * * 55
UK 59 60 * * 45 †
Others 40 20 * * 45 †
Share invested in UK only US only
Railways 33 60 * * *
State Bonds 21 20 * * *
Industry 46 ‡ 4 67 * 66
Other 46 ‡ 16 9 * 22
Petroleum nil nil 24 * 12

Sources: Aldo Ferrer, The Argentine Economy; Raul Neyra, “Las inversiones extranjeras en Argentina”, Informacion Comercial Espanola, 1980; Diaz Alejandro, Essays.
* = not available.
† = UK and Others combined (1975).
‡ = Industry and Other combined (1913).

That is not to say foreign capitalists are not influential. In part foreign industrial capital is concentrated in a few key economic sectors and in the largest firms. Taking only the 100 largest of Argentina’s industrial firms, then 60% of their total sales are the sales of foreign owned businesses.

In the politically unstable period since 1955, US and European capital has seemed more interested in controlling Argentinian industry than in developing it. It has repatriated a notoriously high proportion of its local profits and its policies have helped to hold back private capitalist industry in Argentina.

Role of the State

Apart from a number of important holding companies, Argentinian capitalist firms are relatively small. It is the state which since the Peron period had been the major capitalist enterprise in Argentina. The large public sector now dominates energy and transport and includes armaments, most of the steel industry, and some major branches of agricultural marketing.

The state also plays a very important role in Argentina’s exceptionally highly developed financial system. 47% of total deposits are held in state-owned banks, 38% in Argentinian-owned private banks and 15% in foreign-owned banks.

The potential economic power of the state has not been successfully employed to speed Argentina’s growth not only because of internal contradictions but also because of restrictions imposed from outside on a debtor government. In particular there was the notorious set of austerity measures imposed by the IMF on Argentina in the mid-1960s.

The IMF’s policies were an early attempt by imperialist interests, in alliance with sections of the Argentinian ruling class and military, to break the mould of Peronist economics and create a more welcoming climate for foreign investment.

But, in spite of the growing encouragement of pro-imperialist governments ever since 1955, foreign capital has generally shunned Argentina in favour of other countries like Brazil and some South East Asian countries.

Frank sees the period since 1965 as “a permanent political emergency in which the agro-export interests, in alliance with sectors of the big industrial bourgeoisie (now increasingly allied with American and continental European instead of traditional British capital), have sought to discipline the labour force sufficiently to impose an Argentinian version of the Brazilian, or at least the Mexican model” [9]. He concludes that “the strength of the Argentinian working class . . . prevented the measures that superexploit labour – the measures necessary for a smooth functioning of the “Brazilian model””.

Compared with 1929 the Argentina which Peronism created and which persists to a great extent today was protectionist and isolated. Government policies had obstructed the further growth of primary exports and created a quite widespread and integrated industrial sector, but one which was incapable of competing in world markets. Growth was continuous but grindingly slow. Argentina failed to share fully in the great post-war boom. Its rank fell from one of the top twelve capitalist nations in 1929 to number 31 (in terms of GNP per head) in 1980.

During the course of this debate the historical comparison of Argentina with Australia has frequently been supplemented by a contemporary comparison with Canada, whose population is very similar, but one which is much more dominated by foreign, particularly US capital. The comparison shows, of course, a very wide economic disparity. Argentina is a far poorer and less developed country; its national income per head is only 23% of that of Canada, its manufacturing output 29% of Canada’s and so on. Though it has been distorted in the left press [10] those differences are important and certainly constitute evidence of a qualitative difference between the two economies.

But it is also relevant to make a parallel comparison with another country, say Zaire, whose population is almost the same. That comparison shows that the disparities between Argentina and Zaire are in most respects much wider than those between Argentina and Canada. Zaire’s GNP per head is only 12% of that of Argentina, its manufacturing output less than 2%. Its death rate is 18 per thousand compared with Argentina’s 8 per thousand (Britain’s is 12 per thousand), and so on.

It is hard to conclude very much from such simple quantitative comparisons about the role of countries in the world economic system. But I think that they suggest that it is as difficult to place Argentina in one politico-economic category with Zaire as it is to place it in the same category as Canada. This is further evidence that an understanding of the workings of the world capitalist system requires a more subtle categorisation than the crude contraposition of advanced imperialist nations and backward oppressed ones.

After 1976: from protectionism to a new model

Nearly all economic commentators agree that the 1976 coup marked an attempt by the Argentinian military, along with (especially American) imperialist interests, to end the long political and economic crisis.

The intention was to take the Argentinian economy back to its heyday before the 1930s – to dismantle tariffs and protectionism opening up the economy to imports; to restore the central importance of primary exports, this time including oil; to extend a welcoming embrace to foreign investment; to break the old alliance between national industrial capital and the workers by the ruthless elimination of lame industrial ducks, the destruction of the unions by a huge cut in the real pay of Argentinian workers and incidentally to curb the astronomic inflation.

As with Thatcherism and Reaganomics, the junta’s plans entailed the fact that the economic situation would have to get worse before it got better. But it was supposed to worsen briefly to pave the way for a truly epoch-making improvement.

Instead, the experiment has gone increasingly wrong. A huge industrial slump has happened and weak industries have been bankrupted by the score. And the real wages of workers have been cut in half.

But exports have failed to boom and foreign capital has remained wary of coming in. A brief inflow between 1977 and 1979 has been offset by the closure and withdrawal of a number of foreign manufacturing firms – their local market had vanished and they could or would not export.

Inflation has been reduced but not controlled and a financial crisis has been developing; several major banks have failed over the last 18 months.

These policies led both to a sharp decline in the profits of private and public companies and to a sharp increase in the government deficit. Both of these situations led to a staggering increase in Argentina’s foreign debts, public and private. They probably amount to around $35,000 million – more than ten times the value of productive foreign capital invested in Argentina.

This situation would have brought Argentina close to a major default even without the South Atlantic war. It should not, however, be exaggerated. One of the reasons for the high level of official debt is the fact that the government has since 1976 maintained very high real interest rates and because Argentina has a relatively highly sophisticated banking and financial system which has attracted foreign short-term deposits in Argentinian banks, coming both from imperialist and from other Latin American countries.

Hence as short-term debts have grown so there has been a huge counterpart growth in Argentina’s gold and foreign exchange reserves which at the start of this year were worth $10 billion.

In addition, and much less generally known, Argentina as well as having large foreign debts has almost equally large foreign assets. The only recent estimate of these puts them at $30,000 million, almost as large as the debts, though they are extremely difficult to estimate exactly [11].

Overall, therefore, contrary to general belief, Argentina may not be a debtor country. Those who are obliged to pay the foreign debts, however, are not the same as the holders of the foreign assets. Some are held abroad in the personal bank accounts of the bourgeosie and military hierarchy against the day when they find it wise to leave; some are held by banks; and a few Argentinian companies have themselves invested money in other Latin American countries.

In March this year, therefore, Argentina’s large international assets were not in such a form that they could alleviate the deepening economic and financial crisis or avert the threatening political crisis of Galtieri’s regime to which it was leading.

Galtieri and his economics minister Roberto Alemann planned a sudden last ditch attempt to implement the junta’s long term economic plans – a tightening of monetary control, a new purge of inefficient firms, new cutbacks in government spending and higher taxes and wholesale hiving off of the public sector. Such a plan would be bound to excite renewed workers opposition and signs of a new militancy had been emerging ever since mid-1981.

It was in that context that the junta planned its invasion of the Falklands / Malvinas. Given the continued strength of the Peronist-led workers opposition, the junta attempted to use what seemed the only way of neutralising the obstacles to its economic policies – to excite a wave of national chauvinism. Having failed to eliminate the old national bourgeoisie / organised working class alliance the regime sought to politically assimilate itself to it while economically attacking it.

Neither semi-colonial nor imperialist

The analysis of this article leads me to conclude that Argentina cannot be defined as either a semi-colonial or as an imperialist country.

There are many on the left who might say that statement was illogical in that every country has to be one thing or the other. It is true that at the beginning of this century that Marxist analysts revealed how the development of capitalism had led to a new hierarchy of nations – a select group of economically advanced, oppressor nations and the great mass of economically backward, colonial and. semi-colonial nations. Politically this provided a theoretical background to the view that there existed both reactionary (imperialist) and progressive (anti-imperialist) forms of nationalism.

Later Marxists have rightly used this distinction to argue that in certain cases socialists should support the actions of even reactionary governments in semi-colonial countries because they were directed against national oppression.

These points, if correctly employed, can still provide insights. But they can also be abused. It is wrong to say that imperialism or the epoch of world-wide capitalist domination resulted in an unalterable division of the world into two types of nation. Just as earlier socialists recognised the changing hierarchy of nations so we should observe that it has continued to change – in two ways in particular. One is the emergence after World War 2 of a single dominant imperialist power, the USA, which even today produces a quarter of the world’s output. The second is the emergence, or rather cultivation, of a few countries at an intermediate level of economic development which act economically and militarily as subalterns of imperialist hierarchy of nations. In any case there is no rigid coincidence between the economic level of a nation and its status in the hierarchy of world power.

Neither from the point of view of its relative level of economic development, nor from the point of view of its relations with the rest of the capitalist world, nor finally from the point of view of its role in the capitalist hierarchy of nations, is it possible to allocate a country like Argentina between two mutually exclusive categories of nation. From all these standpoints it occupies an intermediate position.


In Latin America some Marxist writers have devised the term “sub-imperialist” to describe these countries. The most frequently cited examples are Brazil since 1964, South Africa and Iran under the Shah.

There are, of course, many extremely economically backward nations which have pro-imperialist rulers. But the sub-imperialist countries are a special case because their relative economic advancement gives their rulers an element of real independence and initiative on the world stage as well as the material resources on which to base an active, interventionist repressive role in relation to lesser countries.

Argentina in some ways fits this description and in some instances has acted as a sub-imperialist power. From its social and demographic structure it looks more like a poor mature capitalist economy, rather than an underdeveloped one. And for a century it has been a big power in its region. But it has not become one of the elect because of its inherent economic and political instability. And that, as I have argued, is related to the intimidating strength of its working class.

It is important to clarify all these aspects of Argentina’s economy and class structure for many reasons including the analysis of the present conflict and its causes. But I do not think that such a clarification would decide the question of whether socialists should support Argentina in the present war.

Even if it could be unambiguously established that Argentina was an oppressed, semi-colonial nation that, in my opinion, would not convert its role into an anti-imperialist one independently of its aims and of the origins of the South Atlantic dispute.

Galtieri’s aim was to assume, by force against the will of their largely non-exploiting inhabitants, sovereignty of the islands – a move which if it were accomplished successfully would objectively do nothing, either actually or potentially, to increase the living standards or independence of the people of Argentina. Galtieri himself is presumably well aware of this. In any case his purpose in making the invasion was to produce a wave of nationalist sentiment in the shelter of which he might impose further economic hardship and political repression. He did it as a desperate last attempt to avert the demise of his regime.

The arrogance of Thatcher’s reaction does not alter the totally reactionary motivation and context of the Argentinian invasion and should not, in my view, stop socialists in Britain and Argentina from arguing for an instant cessation of the reactionary acts of both governments. It does not convert the struggle into a war between two camps, one of them being objectively progressive. And for socialists to interpret it in that way leads to a loss of an independent vision of a world based on humanity, freedom and justice and not on a choice between evils.


1. Carlos Diaz Alejandro, Essays in the Economic History of the Argentine Republic, New Haven and London, 1970, p. 3.
2. C. Alejandro, Essays, p. 2.
3. All data from Diaz Alejandro, Essays, pp. 29-32.
4. Andre Gunder Frank, Crisis: In the Third World, London 1981, p. 20.
5. A.G. Frank, op cit. p. 20.
6. All figures from Raul Neyra, “Las inversiones extranjeros en Argentina”, Informacion Comercial Espanola, 1980.
7. Will Reissner, “How Britain and the United States ‘underdeveloped’ Argentina”, The Militant, May 7, 1982.
8. Aldo Ferrer, The Argentine Economy, p. 229.
9. Frank, op cit. p. 21.
10. Inprecor and The Militant (USA) use figures (without sources) which considerably exaggerate the differences shown by the most authoritative available statistics produced annually by the World Bank (World Development Report 1981).
11. Carlos Abalo, “Argentina 1976-81”, Comercio Exterior (Mexico), June and September 1981.

Workers Socialist Review Index (1981-84)

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