Australia and Argentina: A Study in Contrast

In the last part of the 19th and beginning of the 20th centuries, Australia and Argentina experienced significant economic growth. By the early 20th century, both countries ranked in the top 10 in terms of income per capita. Studying the history of Australian and Argentine economic development, researchers found that they shared political, geographic, and economic characteristics and had followed similar paths, entering the international market as providers of rural goods.

Economist Andrés Gallo notes that their shared characteristics were made-to-order for the globalization of the world economy that took place around 1900. "First, they had open grasslands apt for the development of rural activities. Second, low density of population permitted the generation of . . . surplus . . .rural goods for export. Third, settlement was easier . . . [because of low populations of indigenous peoples]. Finally, all these characteristics combined made the countries attractive to migratory currents from Europe. Furthermore, United Kingdom interests in these economies generated an important inflow of [capital] that accounted for growing shares of investments, mainly in infrastructure sectors like railroads and other transportation systems. (88-89)

Study Graph 1* to see how Argentina and Australia fared in the first half of the 20th century. Answer the questions that follow.

Part I - Graph 1*

The vertical scale on this graph is an index, a number that allows us to compare data from different economies. Since our concern is with economic growth, we don't need to have the actual income data in Australian dollars and Argentine pesos. All we want to know is: "By what percentage did per capita income grow between 1900 and any year after that date?" We can do that by looking at the change in the index number.
The graph starts at (x,y = 1900,100), meaning that, whatever Australia's and Argentina's per capita income was in 1900, we're calling it 100%. Look at the data where X = 1902. Y for Argentina is about 106 and Y for Australia is about 102, meaning that per capita GDP in Argentina grew 6% since 1902 and per capita GDP in Australia grew 2%.

1. Write a generalization about economic growth that would be true for both Argentina and Australia in the first half of the 20th century.
2. Write 2 generalizations comparing or contrasting Argentina's economic growth to that of Australia.
3. How much did GDP per capita grow from 1900 - 1946
in Argentina? __________

in Australia? ___________

4. Find the following events on the X axis of the graph. Tell how each event affected economic growth in Argentina and Australia and speculate on the reason for that effect.

Event	Effect on Economic Growth - Argentina	Effect on Economic Growth - Australia	Possible explanation of that effect?
World War I
The Great Depression
World War II

5. Predict:

A. Based on the trend established in the first half of the century, what will happen to the economies of Australia and Argentina in the second half of the 20th century?

B. Based on the trend established in the first half of the century, how will Argentina's economic growth compare to Australia's in the second half of the 20th century?

Part II - Graph 2*

This graph also uses an index to compare economic growth in Argentina and Australia, but note that the index has been reset to begin in 1948. Any changes from 100 are read as growth or decline in per capita GDP compared to what per capita GDP was in 1948.

Look, for example, at 1960. Argentine income was about 10% lower (the index is about 90) than it had been in 1948, while Australian income had grown about 15% (the index is about 115) since 1948.

6. If you predicted (as you'd be expected to), in question #5 that Argentina and Australia would continue to experience high rates of economic growth and that Argentina would continue to outpace Australia, this second graph is probably surprising. Estimate the % economic growth from 1948 - 2000:

in Argentina __________ in Australia ___________

If a trend doesn't continue, then the conditions that created the trend must have changed. The challenge for economists has been to explain what changed in Argentina and apparently did not change in Australia.

7. Study the timeline of selected events in Argentine history. Next to each event, draw an ↑ (up arrow) if you think the event increased the willingness of investors and entrepreneurs to get involved in the Argentine economy. Draw a ↓ (down arrow) next to the event if you think it discouraged investment and economic activity.

8. Study Graph 3. What is current Argentine GDP per capita? ___________

9. What would per capita GDP be if Argentina had continued on the trend established in the early 20th C? _____

10. Compare the graph and the timeline. What event disrupted the positive trend?

11. Try out your skills as a beginning economic historian. Based on the data you have, explain why Australia and Argentina entered the 20th century with the same rosy outlook, and ended the century so differently.

An Incomplete Timeline of Argentine History* (click here to view)

Remember that in the early 20th century, Australia and Argentina were in the top 10 in the ranking of world countries by GDP per capita. In 2004, Australia ranked 17th and Argentina, 71st (CIA World FactBook, 2004: http://www.odci.gov/cia/publications/factbook/rankorder/2004rank.html)

Graph 3, below, projects Argentine income growth had the trends of the first half of the century continued.

Graph 3

*All data in this activity taken from: "The Erosion of Rule of Law in Argentina, 1930-47: An Explanation of Argentina's Economic Slide form the Top 10," by Lee J. Alston and Andrés Gallo, June 3, 2003. Used with permission of the author.