The NYT Doesn't Like Argentina's Economic Policy

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Saturday, 05 February 2011 22:03

That is what readers of an article on inflation in Argentina would likely conclude. The article tells readers that Argentina's government: "has tried to quell concerns about mounting inflation by continuing to keep the economy growing at China-like rates."

The implication is that having China-like growth rates is a silly distraction from inflation. In fact, China-like growth rates create the possibility of enormous improvements in living standards. Most countries would be delighted to have growth rates half as fast as China has been able to maintain over the last three decades or that Argentina has sustained since 2002. The problem of even relatively high rates of inflation seem small by comparison. In fact, the reason why economists view inflation as a problem is that it can lead to slower growth.

This article is also somewhat confused in trying to describe the problem that inflation is causing in Argentina. It claims that wages are not keeping up with food prices, but that is not the relevant issue. The question is whether wages have kept pace with inflation. The article does not address this issue.

The article includes a quote from Domingo Cavallo that is highly critical of the government. Cavallo is identified only as "a former economy minister." It would have been worth pointing out to readers that Mr. Cavallo was the minister who designed the policies that led to Argentina's crisis in 2001-2002. The Kirchners' government broke sharply with Mr. Cavallo's policies setting Argentina on a path of solid growth. Without this information, readers might think that Cavallo was a disinterested commentator on the economic situation.