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The Collapse of Argentina, part one
by Louis Proyect
02 April 2002 00:50 UTC
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As the Argentine economic collapse began to deepen, I decided to 
search for radical or Marxist literature on the country written in 
English to help me understand the situation better. This proved 
futile (although I continue to be open to recommendations). Nestor 
Gorojovsky, an Argentine revolutionary who I have been in touch with 
on the Internet or by phone for at least five years now, could 
recommend nothing. (His own efforts at a Marxist overview of 
Argentine history can be found at: 
http://www.marxmail.org/archives/january99/argentina.htm.) Not even 
after posting an inquiry to the H-LatinAmerica list, whose 
subscribers are exclusively academic specialists, were any 
recommendations forthcoming.

Taking the bull by the horns, I plan now to fill this gap beginning 
now with a series of posts based on scholarly material from Columbia 
University's library. Although I do plan to review literature on 
Argentina written in Spanish, most of the source material for my 
posts will be in English, a language that I am more comfortable with 
when it comes to higher-level analysis.

My own involvement with Argentina dates back to the mid 1970s when I 
was drawn into a faction fight within the world Trotskyist movement 
over political perspectives in Argentina. The two main antagonists in 
the debate were the late Joe Hansen, Trotsky's bodyguard at Coyoacan 
and a leader of the Socialist Workers Party, and the late Ernest 
Mandel, the renowned Belgian economist who was on the executive 
committee of the International Secretariat. The Americans and their 
mostly English-speaking followers (I use the word advisedly) backed a 
Trotskyist group in Argentina that appeared to be implementing their 
own orthodox approach.

Led by the late Nahuel Moreno, this group participated in trade union 
struggles, the student movement and opposed the ultraleftist 
guerrilla formations that were kidnapping North American executives 
or hijacking trucks in order to dispense meat and other goods in poor 
neighborhoods like Marxist Robin Hoods. It was one of these groups 
that the Mandel faction backed. Although they paid lip service to 
Trotsky, these Argentine guerrillas organized as the PRT/Combatiente 
were more interested in applying Regis Debray's foquismo theory to 
the urban sector.

My role in all this was to battle the Mandel supporters in Houston, 
Texas who held a near majority in the branch and whose affinity for 
guerrilla warfare was open to question. Most were disaffected from 
the SWP leadership, whose alleged "petty-bourgeois" orientation to 
the student movement was supposedly leading the party to ruin. A 
couple of years later, the SWP leadership would go completely 
overboard in a kind of 'workerist' orientation to the trade unions, 
thus robbing the dissidents of their raison d'etre. By the time this 
turn had taken place, the SWP and the Fourth International had parted 
ways. As a local leader of the anti-Mandel faction, I had the 
opportunity to spend long hours in discussion with Argentine 
co-thinkers who visited Houston to give reports for our faction. 
Security was extremely tight in those days and I had to check my 1968 
Dodge Dart for bombs before driving any of them to a public 

During that intense struggle, I gained a deep appreciation for the 
Argentine people, their culture and their revolutionary will. 
Although I grieve to see their personal suffering today, I am 
inspired to see them acting collectively for a better country and 
world. One hopes that their heroic example can begin to erode the 
"TINA" mood that has affected wide sections of the left since 1990.

In this first post, I want to address the question of Argentina's 
"golden age", a notion that you can find in many left publications or 
on the Internet. In this version of Argentine history, the country is 
seen as an exception to the rest of Latin America where conventional 
notions of "imperialism" and "dependency" might apply.

For example, British state capitalist theoretician Chris Harman 

"Argentina is an industrial country, with a higher proportion of its 
workforce in industry than in Britain. It's also a country where 
working people have, within living memory, experienced living 
standards close to west European levels. It was known as the 'granary 
of the world' at the beginning of the 20th century, with an economy 
very much like that of Australia, New Zealand or Canada, centred the 
massive production of foodstuffs on giant capitalist farms for the 
world market. Relatively high wages made it a magnet for millions of 
immigrants from Italy and Spain who brought traditions of industrial 
militancy with them."


Brad DeLong, an economist who held a post in the Clinton 
administration and who is a ubiquitous figure on leftwing electronic 
mailing lists, wrote the following on Progressive Economists Network 

"As I said quite a while ago, Argentina was a *first* *world* 
country--like Canada, Australia, or New Zealand--up until the 1950s. 
Arguments that development possibilities were constrained by relative 
backwardness may work elsewhere: they don't make *any* sense for 


If views like these are meant to support a kind of Argentine 
exception to the Leninist concept of imperialism or its subsequent 
elaborations such as the Baran-Sweezy theory of monopoly capitalism, 
they are mistaken. They would fail to see Argentina's role in the 
world capitalist system, which--despite favorable moments--has been 
that of victim of imperialism. Comparisons with the USA, Canada, etc. 
are specious, even if in a given year income or other statistics were 
comparable. The *structural* questions are far more important for 
understanding Argentina. Despite the presence of European immigrants, 
industrialization, national independence, the lack of feudal-like 
latifundias, etc., Argentina had much more in common with direct 
colonies in the 19th century like India.

Specifically, one of the main factors that led to Argentine 
dependency was its reliance on British capital and expertise for the 
construction of railways in the 19th century. Just as was the case in 
India, these steam-driven showplaces of modernization did nothing but 
drain the country of capital and force it into a secondary role in 
the world economy.

If one is a Marx "literalist," there can obviously be a lot of 
confusion about the introduction of railways into Argentina or India, 
especially when Marx wrote:

"I know that the English millocracy intend to endow India with 
railways with the exclusive view of extracting at diminished expense 
the cotton and other raw materials for their manufactures. But when 
you have once introduced machinery into locomotion of a country, 
which possesses iron and coals, you are unable to withhold it from 
its fabrication. You cannot maintain a net of railways over immense 
country without introducing all those industrial processes necessary 
to meet the immediate and current wants of railway locomotion, and 
out of which there must grow the application of machinery to those 
branches of industry not immediately connected with railways. The 
railways system will therefore become, in India, truly the forerunner 
of modern industry." ("The Future Results of British Rule in India," 
NY Daily Tribune, Aug. 8, 1853)

In contrast to these early hopeful writings, before Marxism had 
developed an understanding of the negative role of imperialism, the 
historical record demonstrates that foreign owned railways did not 
lead dependent countries to become anything like the those of the 
investors, engineers and builders from the core. Rather than serving 
as a catalyst for Argentine industry, they did nothing except enrich 
British finance capital, the nefarious Barings Bank in particular. 
For a scholarly treatment of this subject, we can turn to Alejandro 
Bendaña's 1979 PhD dissertation "British Capital and Argentine 
Dependence 1816-1914". (Bendaña was a senior level Sandinista 
official who served as 'responsable' with Tecnica, the volunteer 
organization I was involved with in the 1980s. He continues to 
participate in the radical movement, nowadays with the Center for 
International Studies in Managua and the Jubilee Campaign against 3rd 
world debt.)

The most important sector of the Argentine ruling class in the 19th 
century was the 'estancieros', or ranchers. From 1820 onwards, they 
began to develop an alliance with British capital, which was seen as 
strategic for the goal of exploiting the country's land-based riches. 
Arising from within its ranks, Juan Manuel de Rosas emerged as the 
primary spokesman for this class. British merchants played an 
important role in guaranteeing the Argentine rancher access to world 
markets. Smiling benignly on this interdependence, the British consul 

"the manufactures of Great Britain are becoming articles of prime 
necessity. The gaucho is everywhere clothed in them. Take his whole 
equipment - examine everything about him - and what is there not of 
raw hide that is not British? If his wife has a gown, ten to one that 
it is made at Manchester; the camp-kettle in which he cooks his food, 
the earthenware he eats from, the knife, his poncho, spurs, bit, all 
are imported from England. . . Who enables him to purchase these 
articles? Who buys his master's hides, and enables that master to 
employ and pay him? Who but the foreign trader. Stop the trade with 
foreign nations, and how long would it be before the gaucho would be 
reduced to the state of the Indian of the Pampas, fed on his beef and 
horse-flesh, and clothed in the skins of wild beasts?" (Bendaña, p. 

However, one important piece was missing from this jigsaw puzzle. 
Unless a modern railway system was introduced into the country, 
Argentine goods would be not as competitive with those of countries 
which could deliver beef, hides, and etc. to seaports in a much 
shorter time over rail rather than horse-back. Furthermore, unless 
workers and managers could make reasonably quick trips over rail 
between cities and rural points of production, the entire system 
would lack the kind of internal cohesion that other capitalist 
countries enjoyed. From the standpoint of classical economics, one 
would think that it would be to the mutual benefit of English and 
Argentine capitalist classes to develop a kind of partnership. 
Instead, what transpired has much more in common with the con games 
of the 1990s in which Wall Street banks got rich at the expense of 
the Argentine people. Except, in the 19th century, it was Barings 
Bank rather than Goldman-Sachs that was doing the robbing.

To look after its interests in this vastly ambitious 
railroad-building enterprise, the Argentine government named North 
American William Wheelwright as its agent. They were overly 
optimistic. After making the rounds in British banking houses, 
Wheelwright said in 1863 that a deal could be done only on the 
following basis:

--The land grant must be doubled (land adjacent to the tracks given 
free to the railroad company.)
--45 percent of the railroad revenue would be counted as working 
--The profit ceiling would be raised to 15 percent, more than triple 
the norm.
--Most importantly, the expropriation clause would be eliminated.

Although the Argentine ruling class and its British partners were 
committed to liberalism in the economic sphere (the model for 
1980s-90s neoliberalism), this loan-sharking deal had nothing to do 
with free market principles. Such concessions could only reflect the 
internal weaknesses of a bourgeoisie that relied on cattle ranching, 
as opposed to the British ruling class that had accumulated vast 
amounts of capital through manufacturing, and then finance.

When the shares for Central Rail, the new British-owned railroad, 
sold sluggishly, the bankers demanded further concessions. No longer 
would working expenses be limited to 45 percent, they would be 
*whatever the company accountants said they were*. So, not only do 
you get concessions forced down the throat of the Argentine 
government, you get an 1860s version of the kind of accounting that 
Arthur Anderson did on behalf of the Enron crooks.

To make sure that all the Central shares got sold, the British 
investors demanded that the Argentine government buy 2000 shares, 
which is a little bit like asking someone being hijacked to drive the 
truck. An Argentine Minister glumly commented:

"We are faced with having to lower our heads for all these demands 
and any other ones that may be put before us given our nation's need 
for the railway's benefits and our own incapacity to secure these by 
any other means." (Bendaña, p. 93)

Finally, in the May of 1870, 17 years after the original conception 
and 7 years after work began, the first locomotive arrived in 
Córdoba. Over the course of the 1870s, the Argentine state provided 
nearly 40 percent of the guaranteed profits for the new railroad. In 
a nutshell, the wealth of the country was being drained to make sure 
that British investors enjoyed super-profits. Furthermore, the 
British enterprise was tax-exempt. This turned out to be a bonanza 
for the Central Argentine Land Company that came into existence in 
1871. Unlike the railroad, commercial exploitation within land claim 
areas were far less risky and had no particular claim to the kind of 
tax-exempt status enjoyed by large-scale capital projects. Once 
again, the weak Argentine bourgeoisie had been given an offer that it 
couldn't refuse.

With British technological superiority, one might at least hope that 
the new railway would provide adequate service. As it turned out, the 
Argentine people had ended up with a Yugo rather than a Rolls-Royce. 
Public complaints about service and rates grew legion.

Central was just the first in a series of white elephants. Next came 
the Northern, the Eastern, and the Great Western Railways, all 
financed by the British and all imposing larcenous penalties on the 
people of Argentina. A government audit revealed that the East 
Argentine railroad was marked by an excess of employees (exclusively 
English at high salaries), overly generous salaries for company 
directors, inadequate rolling stock, dubious accounting procedures, 
and bloated operating costs.

When such exploitation operates in open view, one might ask why the 
Argentine capitalists did not rebel. After all, if one is committed 
to national development, then one must allow oneself the ultimate 
weapon against foreign exploiters: expropriation. Unfortunately, 
except for the urban middle-class, such calls were not made. As is 
the case today, the dominant fraction of the national bourgeoisie 
lost its nerve. And like today, the ideological excuse for inaction 
was a commitment to the "free market." The estancieros regarded their 
own economic well-being as synonymous with the extension of railway 
lines made possible by foreign investment.

When the harsh reality of British theft collided with the delusional 
schemas of the local bourgeoisie, voices of dissent began to be heard 
in parliament. Why couldn't the nation redeem itself through seizure 
of properties that were based on criminality to begin with? Even the 
conservative "La Nación" asked in 1872:

"Can and should the state build all railways itself and expropriate 
existing ones?  We do not believe that the benefits of state railways 
should necessarily carry us to the latter consequence . . . Although 
the country cannot afford expropriation now or for many years to 
come, there may come a day when revenue and necessity may, possessed 
of means and facing a need for new lines, expropriation might become 
convenient." (Bendaña, p. 152)

Skilled as they were in keeping the natives at bay, the British 
turned to one defense after another. They bribed ministers, 
congressmen and railroad bureau officials to vote against nationalist 
legislation or to look the other way when laws were being broken. 
When this proved insufficient, the British were not above gunboat 
diplomacy. In late 1875, the British bank in Rosario suddenly 
demanded immediate repayment of railroad notes as part of a maneuver 
to destroy local financial competitors. When the nationalist-minded 
local governor in Santa Fe sided with his countrymen, the British 
sent their navy to blockade the city. Buenos Aires caved in to the 
show of force and the British won their demands without a shot being 
fired. Bendaña cites H. S. Ferns's "Britain and Argentina in the 
Nineteenth Century": 

"prosperity had created a nation of boosters, and the porteños 
(Buenos Aires elites) looked at the Governor of Santa Fe as Pierpont 
Morgan might have regarded William Jennings Bryan." (p. 258)

By 1913, Great Britain owned 95.8 percent of all private railways in 
Argentina. That amounted to 60.2 percent of total British investment 
in the country. The economic consequences on the nation were 
enormous. Arturo Castaño, a legislative deputy and rail expert, 

"the more the railways extend themselves, the greater will be the 
economic disruptions, and the greater will be the migration to the 
cities from the provinces. A third of our national production is 
absorbed by the railways, without the Executive being able to 
intervene in rate-making due to an administrative system which favors 
the companies."

Indeed, when foreign capitalists absorb a THIRD of national 
production, the question of imperialism has to be addressed.

The railway era lasted about a century. The first 3 decades, from 
1830 to 1860, were a time of rapid expansion in the imperial centers. 
The spread of railways into Asia, Africa and Latin America did not 
produce concomitant benefits. Although Cecil Rhodes characterized 
railroads as "philanthropy plus 5 percent," the profits were always 
far higher and the progress realized in countries such as Argentina 
was far less than advertised.

In my next post, I will take up the question of Juan Perón and his 

Louis Proyect, lnp3@panix.com on 04/01/2002

Marxism list: http://www.marxmail.org

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