The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Still Dismal ??

08/14/2019

The nation of Argentina has been circling the drain since 1946, when Juan Peron became president.  Since then, I’ve lost track of how many crisis the nation has endured, such as depressions, devaluations, and defaults.  Their stock market dropped 38% on Monday, which is not surprising since interest rates have jumped to 74.8% from 63.7%, and their currency has dropped 30%.  Their budget deficit each year is almost entirely due to entitlements.  You know – gotta take care of your peeps!  According to the IMF, the per capita income of Argentina was only $11,617 last year.

Compare that with the country of Iceland.  Except for the banking disaster coming out of the Great Recession, it has enjoyed a relatively stable and unremarkable economy.  Their per capita income is $74,278.

Argentina has enormous natural resources, while Iceland is just a volcanic rock in the cold north Atlantic.  So, why is Iceland so much more prosperous than Argentina?

The birth rate per thousand people is 18 in Argentina and only 12 in Iceland.  Compound that out a few years and the population difference is dramatic.

(I have long argued we need to carpet-bomb the world with condoms, but maybe not for responsible countries like Iceland.)

Thomas Malthus was an English cleric, who was also one of the earliest economists.  (In fact, economics originally became known as “The Dismal Science” due to his theories.)  He is best known for his theory on population in 1798, which argued that mankind was doomed to cycles of war, because population grows exponentially while food supply only grows arithmetically.  In other words, people have babies faster that we can get more land into cultivation.  Wars are therefore necessary to control population growth and prevent mass starvation.   He could not have foreseen the dramatic growth in food technology, and his theory became discredited.

Maybe, his theory should be restated to “population grows exponentially, while our ability to govern doesn’t grow at all.”

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