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The Argentine Great Depression of 1998-2002 led to massive unemployment and loss of jobs. Several factors contributed to this situation. Moreover, the country was impacted at social and individual levels. However, a solution to social and economic problems was found, and the country embarked on the economic growth. This paper provides a description of the background leading to the Great Depression by evaluating the underlying causes and the impact on an individual and society. It also discusses the solutions that were instituted to contain the crisis.
Argentina experienced its worse social and economic crisis in history between 1998 and 2002. The crisis dubbed as Argentine Great Depression saw the escalation of the countrys economy from a recession into a depression, leading to a double negative digit growth during the final year of the crisis. During this period more than 50% of the countrys population was poor. The situation was bad with 7 out of 10 children becoming poor (Kehoe, 2007). Unemployment in the country reached 50% among the many working classes. The depression was worse to the extent that thousands of impoverished middle class professionals were forced to receive food stamps in the city while picketers blocked the highways and raided overseas businesses that were still operating in the country. This paper gives a description of the background leading to the Argentine Great Depression. It evaluates the underlying causes and the impact on individuals and society. It also provides the solutions that were adopted to overcome the crisis.
Factors that Led to the 1998-2002 Argentine Great Depression
The 1998-2002 Argentine Great Depression was caused by historical events in Argentina that had characterized the political and economic scene in the country since the 1976 National Reorganization Process. During this period the country incurred huge debts for unfinished projects. Politically, the country had faced challenges in its leadership with stints of democratic and military leadership throughout 80s and 90s (Krueger, 2002). Thus, the political class had focused on military empowerment as opposed to social investment. The Falklands War as well as the failure of the government to cultivate confidence in its currency caused the loss of business with regional countries.
The endeavors to fix the exchange rates led to the reduction in the US circulation in the country and the subsequent loss of employment and industrial infrastructure. The government also continued its high-spending and rampant corruption. There was also massive money laundering and tax evasion that contributed to the transfer of money from Argentina to offshore banks (Krauss, 2001). Important trade partners, including Brazil and Mexico, were also facing economic challenges. It led to mistrust in the regional cooperation. Coupled with spiraling inflation that reached a high of 5000%, there was a fall in the real wages to the lowest level in history. The prices of state funded utilities increased as national debts borrowed from IMF continued to increase. According to Kehoe (2007), the Great Depression in Argentina could, however, be said to have been caused by the endeavor to fix the exchange rate of the countrys currency against the dollar by the countrys Economic Minister in early 1990s. The government also failed to tame its borrowing, leading to an increase in the national debts as the country lacked avenue to generate revenue through taxation (Saxton, 2003).
Impact on the Society and Individual
At the social level, the government was unable to provide basic amenity services to people. The total national debts increased as the country became unable to service its loans. The country defaulted on payment of its debt amounting to 132 billion dollars, which represented a seventh of all international debts in Third World countries (Buscaglia, 2004). Many companies that were run by the government collapsed as international businesses closed shops in the country. Moreover, the neighboring countries lost trust in the countrys economy as they shunned doing business with the country. There were revolts and riots that were directed against the government forcing elected leaders to resign. In addition, provinces in the country started using their own quasi currencies to contain the shortage of money supply in the country. At the individual level, many people lost their jobs as unemployment reached 50% for the first time. Many middle-class employees who were working for the government were retrenched as families were being rendered poor.
Solutions to the Economic Crisis
The first solution came with the devaluation of the Argentine currency peso against dollar. The devaluation of peso allowed export of agricultural products and discouraged imports. The Argentine exports were cheap and competitive on the international market. It allowed many people to be employed in companies that had just been revived. The new election also brought in leaders that were well-grounded in the economy. The leadership followed the economic model that build confidence in the countrys management of public resources as corruption and money laundering were curtailed (Saxton, 2003).
Leaders who were suspected of corruption and money laundering were forced to resign and charged in a court of law. The theory that Argentina went into the Great Depression for its high borrowing and poor spending was true because when the proper management of public resources was put in place, the economy started to grow immediately. The endeavor to fix peso against dollar harmed the country as exports from the country were expensive. The theory that neighboring countries contributed to the depression is not correct because these countries were also experiencing their own economic crisis and, therefore, were not in a position to assist Argentina (Krueger, 2002).
At the individual level, people were put back to work as economies revived, and there was a demand for Argentine goods on the international market. Moreover, better political leadership instituted confidence in people, and they stopped rioting and barricading highways allowing economic activities to continue. With the restoration of peace, international investors also started gaining confidence in the country. The level of poverty reduced with many people going back to work. The government also put in place structures to collect revenue which enabled it to start repayment of its loans almost two years after the depression (Krauss, 2001).
In conclusion, the 1998-2002 Argentine Great Depression qualifies as one of the worst depressions ever experienced. It had resulted from a number of historical events like debts accruing from stalled projects. It led to high level unemployment and inflation as most companies were collapsing. However, with such interventions as devaluation of currency and putting the new leadership in place, the country slowly overcame the crisis. The experience by Argentina became a lesson to other countries over the need to prioritize social investments.