Argentina faces another opportunity but in a different world

Argentina has a long history on changing governments with consequences in its political and economic policies every few years. These have resulted with constants changes in its economic development with deep crises and consequent recoveries, even though it is a natural rich resources country, allowing these disorders.

Argentina went through a decade of totally laissez faire economy without state intervention to another decade in which all companies had to ask the authorization to the government to move in any direction. None of it resulted in a development long term economy with income equality inside for all the society.

Nowadays a new administration is in charge and has been applying policies to put in order the economy with the final objective to attract investments, attempting to end with 4 years of economic stagnation.

As a consequence of that, macroeconomics measures that are being taken such as: sincere the exchange rate, reduce inflation, renegotiate part of his national debt on default, decrease or eliminate export taxes, order in external and fiscal imbalance, invest in public infrastructure, and so on., with the final intention to reach a sustainable economy to be more competitive in this globalization era.

The big question is: Are these measures enough to suit it into the actual globalized world?

Certain group of economists believe that when the macroeconomic stability will be restored this is enough to achieve the investment growth and help to develop the economy by itself. As far as I am concerned, to reach this stability it is necessary but not enough to achieve a sustainable development economy which will be maintained through decades, taking us out of the pendulum of crises and growth which the country has experienced for more than a century.

We live in a globalized world and the difference in less developed and developed countries, as Joseph Stiglitz^[1] described, “is not just a gap in resources or output but a gap in knowledge”.

For that reason, the capacity to produce the “knowledge capital” necessary to compete and grow in the global market is the essential objective that has to transcend macroeconomics measures that are being taken.

Being a developed country is just when a large portion of the companies reach the best performing in their productivities and manufactures in the global actually economy and have the possibility to compete and export theirs products to others developed countries.

Consequently we have to leave behind an economy only based on natural resources to another which adding an industrial export oriented with the necessary innovative technology in theirs products, leaving out from the commodity value zone.

It is true that the disruptive innovation that was told us by Clayton Christensen^[2], it is the aspiration that all industries and developing economies want to reach it, though it is impossible for Argentina to try to develop it in a few years. It should pass through other previous stages like reverse engineering and creative imitation to assimilate the technology capacity and create a learning environment to acquire the necessary knowledge capital to enter into the innovative and productivity level.

Therefore a government with a proactive role in guidance the economy is totally essential to overcome this gap that Argentina lives on. However it will be identified the right balance between the state intervention and a free market, ensuring a well-functioning economy.

Creating economic policies that remove obstacles to investments will be an important role to generate knowledge which via learning spillovers, increasing his position in the world. Consequently conduct this investments to select sectors with the possibility to produce dynamic comparative advantages need to be the role of the government and its policies.

To establish state strategies to these sectors and to create the dynamic key factors, have been arduous and it is impossible for politicians and public administrators who have been working to deal with daily works and policies implementation.   

We have the examples of other countries that had succeed in this process to transform their economies, like Korea, Finland and Singapore. Each country had built strategies based on his culture, society, environment, history, government, territory, and so on. However, all of them had several similar strategies:

• Export oriented economy with the government supported to grasp the necessary high level of technology capacities and productivities to be competitive with their products in the global markets.
• Their education system has been the priority in a long term policy that pursues the creation of a learning environment for all the society.
• Established agencies separate of the normal structure of the government, managed by technical professional with the skills and aim to search the long term market opportunities, generating state strategies to create the necessary dynamic comparative advantages that will be implemented by the relevant ministry.

Essentially these three countries are good examples to study the Agencies who are responsible for the strategic development and coordination economic.

Korea has the agency called “Korea Trade-Investment Promotion Agency” (KOTRA) in charge of trade and investment promotion to enhance the competitiveness of the country.

Singapore has “The Economic Development Board” (EDB), which is the lead government agency that plans and executes economic strategies that enhance Singapore’s position as a global hub for business, investment and talent.

Finland has the “Research and Innovation Council” that leads the national innovation system as a whole and chaired directly by the prime Minister. It is responsible to advise the Government and its Ministries in important matters concerning research, technology, innovation and their utilization and evaluation and support diversity and diversification of higher education institutions.

If Argentina wants to start a wealthy long term development, it will have to go further to put in order the economy with macroeconomics measures, and copy the strategies of successful countries who are leading today the industrial knowledge global economy.

Meanwhile by the time this stage will be reached, on the one hand the government will have to protect the current industries to maintain the employment and do not enter in a crisis that will not permit to advance to the target. Well-designed policies will be taken, as for example: remove restrictions to foreign direct investments in partnership with local industries, exchange rate interventions, trade restrictions that are permitted by the WTO, knowledge production subsidy, and so on.

On the other hand it will be encouraged and demanded to the national companies to incorporate the technology capacities to reach the leading-edge technology that the innovative level requires, as soon as possible.

[1] Stiglitz, J., & Greenwald, B. (2014). Creating a Learning Society. New York: Columbia University Press.

[2] The Innovator’s Dilemma: The Revolutionary Book that Will Change the Way You Do Business (Collins Business Essentials) (01 January 1997) by Clayton M. Christensen