EclectEcon

As the [US] presidential campaign drones on, Barack Obama and the Democrats are fleshing out the promise of "change" with some specific, big-government policy proposals. Many are familiar, perhaps because they already have been tried – in Argentina.

That country has gone from South American breadbasket to world-class basket case. ...

The [Argentine] constitution once held limited government and private property to be among the highest ideals of the land. But in the 1920s these protections, which had made the country a magnet for immigrants and the seventh-largest economy in the world, began to erode.

An early example of this assault on liberty was when Congress imposed a rent freeze to deal with a housing shortage after World War I. This only exacerbated the problem, and in 1922 a politicized Supreme Court widened state powers to allow the regulation of rents. That decision put property-rights protection on a slippery slope. A decade later the Court gave the legislature the power to regulate interest rates.

The interventions didn't end there, and as state control of the economy expanded and the nation grew poorer, the country could not recover its footing. Economic populism and labor militancy took hold; protectionism blossomed and Argentina became a welfare state. Meanwhile, the informal economy swelled under the high cost of legality.

Fiscal crises have been recurring. According to a paper recently released by researchers at the Buenos Aires business school Eseade, external debt as a percentage of GDP has now climbed to 56% compared to 54% in 2001. If you include the unpaid debt to bondholders, the number is 67%. More than a few analysts are worried that should the economy slow, the government may tap Central Bank reserves, sparking a run against the peso or, fearing that, choose default, for the second time in a decade, as its escape hatch.

Will that mean an end to ballooning entitlements, class warfare, hostility toward producers, capital and private property, protectionism and subsidized central-planning? Unlikely.

Americans reading that laundry list may note that it sounds a lot like the mindset of the left wing that will dominate the Democratic Party's convention and choose Barack Obama as its candidate in August. From nationalized health care and government-owned refineries to punishing taxes on the rich, Argentina has been there, done that. There are good reasons to find the resemblance disturbing.