The comparative analysis of long-term development in Argentina and Australia is a historic issue repeatedly addressed in academia. This focused attention could exist because both of these countries belong to the group of the so-called “fortunate countries” that have a vast territorial area (Australia with 7.7 million km 2 and Argentina with 2.8 million km 2), low population rates (24 million inhabitants in Australia and over 43 million inhabitants in Argentina), and supply abundant natural, agricultural and mineral resources. Despite the fact that these characteristics could also apply to Brazil, China, the United States, Russia, India, Canada, the Democratic Republic of the Congo, and surprisingly Indonesia; only Argentina and Australia, together with Canada emerge as global leaders in terms of their present value and the future potential of natural resources per capita. Both countries are, geopolitically speaking, located in the so-called “ends of the world”, but currently, Australia, close to Southeast Asia, is heavily influenced by Chinese economic dynamism. Moreover, both countries arose from European colonization, but by different kingdoms. Argentina was colonized by Spain during the mid-16th century while Australia was populated since the end of the 18th century by convicts sent by the British government (to relieve further overcrowding of British prisons), along with English, Scottish and Irish settlers.
Researcher Angus Madison’s historic economical estimates in 1820 indicated that the GDP for the newly emancipated Argentina could have been more than 4 times higher than that of the continent that would later become Australia. However, as the population of Argentina, over 700,000, was twice that of Australia, the Argentine GDP per capita was double the Australian GDP. Even though both countries were marginal regions of the Spanish and British empires, they had little economic significance, but were strategically important.
From this initial reference, successive comparative analyses of their development could be set in periods of about 50 years each. From 1820 until 1870, our country was constantly involved in internal battles and external wars in the midst of becoming politically institutionalized in 1853. This period could be called “our own Middle Ages”. Such an extended absence of internal equilibrium was burdensome to our economic development. In 1870, our GDP was only half that of Australia, since Australia, in addition to having no serious domestic conflicts, had taken advantage of the technology derived from the first English Industrial Revolution to technologically advance itself. Consequently our GDP per capita, which had been double that of Australia half a century before, halved since both Australia and Argentina had similar populations (approximately 1.8 million) at that time.
In 1930, Argentina’s GDP exceeded 50,000 million dollars annually due to several factors: the political integration of the province of Buenos Aires to the Republic in 1870, the influx of hard-working Italian and Spanish immigrants, the incorporation of large areas of land in the fertile central region-called “The Humid Pampas”, and the use of British capital flow for railway infrastructure, budding factories, and ports. Hence, Argentina entered an unprecedented phase of economic growth that fully exploited its location alongside the Atlantic Ocean. And thus, it’s former economic deficiences in comparison to Australia were compensated for as a “agricultural boom”, and a surplus of exports, reigned. As the population of Argentina reached 12 million inhabitants, again doubling the Australian population, the GDP per capita of both countries balanced out at 4,500 dollars annually.
After the global crisis caused by the New York Stock Market Crash in 1929, the world was changed abruptly. Nevertheless, despite this globally profound economic crisis, both countries were able to recover and continued to develop, albeit without their previous dynamics. The volatile political environment of Argentina drove down the GDP, as it had before one hundred years ago, while Australia experienced higher economic growth, but in 1980 the GDP of both countries equalized again at over 200,000 million in today’s dollars. Despite the fact that Argentina’s population was double Australia’s, at 28 million, and steadily increasing, our country still had half of Australia’s GDP due to slower developmental growth in 1980. But namely, recent history has shown us the greatest divergence between our country and Australia economically. During the 1980s, both countries again faced a challenging external state of affairs for which Argentina was not well-prepared as the serious political, social and economic problems of the previous decade had slowed it’s development.
Consequently, Argentina faced a tremendous “stop” in its economy. It is only from the early 1990s that both countries resumed an accelerated developmental path, exemplified in Australia’s growth through the their exploitation of the closeness and connections they shared with the dynamic markets of Southeast Asia. From that period onwards, our country doubled the annual GDP of our economy.
On the other hand, Australia has increased their GDP in real economic terms at least five times since 1990. The present income per person in Australia is four times higher than in Argentina. The causes are, undoubtedly, numerous. Only one cause, however, deserves further explanation. In the mid-80s, Australia had reached an annual inflation rate of almost 20% and above, complicating its stature. In effect, the Productivity Commission was created to resolve differences in the 90s. Even though many institutions similar to the Productivity Commission were instituted globally, Australia maintained one of a unprecedented nature that was lawfully independent from the government. This was a crucial factor that propelled the Australian economy towards 25 years of continuous growth at an average annual rate of above 3%.
The central motif of the Productivity Commission that shaped its creation can be summarized as: a nation’s productivity is paramount for their long term development. More pointedly, a society that has the joint capacity to create the best output and equitably distribute it, as well as prioritize the preservation of the incentives that lend themselves to a efficient form of productivity when public funds are at stake showcase this line of thought. The complexity Australia faced is reflected in a report in the 80s that pointed out that “the Australian economy is so inefficient that an average ordinary worker takes more and more complex decisions when driving to work than at work”.
The four key reforms were: 1. a renewed and greater relationship with the world, 2. an in- depth reform of the financial sector, 3. a modern labor reform 4. the commitment to the continuity of laws that promote, gradually and permanently, national productivity, as a continuous tool for greater efficiency and equity for the whole society. Perhaps the statement that best summarizes how the Australian Productivity Commission impacted their economy can be phrased as the following- both countries provide obligatory and free education, but only Australia necessitates that their education must also be challenging and of a high quality.
* This article was written by Castor López, engineer and CEO of the Pensar Santiago Foundation. The author is Chilean but was raised in Melbourne, Australia.