Economies are on my mind: Australia, where I’m on a book tour; Argentina, which just voted again for Javier Milei’s party; and Ireland where we elected a president who could be described as hard-left.
Australia is the country that Argentina should have been: prosperous and pragmatic. And Argentina is the country that Ireland, now prosperous but fragile, might yet become.
Economic history is replete with examples of good countries going bad and of bad countries coming good. From the mid to late 20th century, Argentina was a good economy that went bad. In the very late 20th and early 21st centuries, Ireland was a bad economy that came good. Australia was a large sheep farm until 1960, but, as Argentina faltered, the Aussies prospered.
Looking ahead, Ireland must make some economic choices that will determine whether we follow Australia or Argentina.
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In the early 20th century, Argentina and Australia were strikingly similar wealthy New World economies with vast territory, abundant natural resources and small native populations.
Massive waves of European immigration, initially from here and Britain, fuelled their growth. In January 1889 the SS Dresden left Cobh, Co Cork, bound for Buenos Aires, with 38 first-class passengers, 20 second-class ones and 1,759 third-class passengers. It was the largest group of immigrants to dock from one vessel in the history of Argentinian migration.
After the Irish, came the rest. In the early 20th century, Argentina was the second-largest destination for European migrants, receiving nearly six million people, mostly from Italy and Spain, by the 1920s. Australia, too, opened its doors: almost 5.9 million settlers arrived in the 50 years after 1945, including large communities of Italians, Yugoslavs and Greeks, as well Jews and Lebanese Christians.
[ As Ireland has become richer, more Irish people are heading to Australia ]
Both nations are blessed with extraordinary natural wealth. Argentina’s pampas offer the most fertile farmland in the world for beef and grain exports, and there are minerals such as copper, oil and uranium. Australia sits atop vast mineral riches, including iron ore, coal, gold and natural gas.
Economists expected Argentina and Australia would follow similar trajectories of development. Indeed, around 1900 these countries ranked among the world’s richest in GDP per head with similar per-capita GDP and income sources.
Today, Australia is among the richest countries and has low and stable inflation. Meanwhile Argentina has fallen from seventh-richest country to 77th. Last year Australia’s GDP per capita was about $65,500 (€56,600), roughly five times Argentina’s at $13,500.
Australia’s 26 million citizens enjoy high living standards and relatively low poverty. Argentina’s 46 million have seen living standards erode, around two-fifths live in poverty while inflation in Argentina has spiralled into triple digits (100 per cent-plus in 2023).
In 1950, both countries had so much promise. What happened?
It all came down to choice. Australia chose capitalism while Argentina embraced Peronism, an odd combination of wishy-washy leftist economics, spiced up with singalong nationalism. Populist right meets flag-waving left.
By the 1950s, Juan Perón, influenced by Benito Mussolini, put short-term social benefits and state control above fiscal and market discipline, using Argentina’s immense wealth to boost wages and welfare wildly.
In a few years, he nearly doubled industrial workers’ pay and he gave out free healthcare, social security, even free meat, flowers and sweets to win elections. His spiritual descendants, the ”Kirchneristas" (after previous Peronist presidents Cristina and Néstor Kirchner), are the latest incarnation of the same economic idiocy.
Since 1950, Argentina has suffered bouts of hyperinflation, multiple currency crashes and repeated debt defaults. The expression “Argentine paradox” is used to explain a rich country made poor. Savings fled the country; talent often followed.
Meanwhile, Australia, a healthy democracy with strong rule of law, enjoyed institutional continuity, attracting investment and retaining local capital.
In Argentina’s congressional elections this week, president Milei received a resounding mandate to continue what he’s been doing for the past year: cutting state spending, bringing down the budget deficit and, despite much hardship, crushing inflation. With a $40 billion bailout from the US, Milei has three years left. If he manages a recovery, his ideological enemies must surely applaud.
What might the tale of these two big economies have to do with Ireland?
At its core, the story is about policy choices taken in good times when the long-term cost of poor short-term policies could be masked by the soothing balm of ample revenue. Argentina thought the good times would last forever. They don’t. Good times must be underpinned by good economics.
In Ireland we are acting as if the good times will last forever – and the related drift toward populist economics and bloated governance is obvious. Government has ramped up spending at an unprecedented pace. Multinational money has turned the political landscape Peronist.
Annual public expenditure growth averaged about 6.3 per cent from 1995–2021, but soared to roughly 14 per cent between 2021 and 2024. Ireland’s so-called centre-right Coalition has shifted leftward, prioritising redistribution and social spending. Irish policy is, indeed, more left than the UK’s Labour Party.
Like Argentina, our expanding state apparatus means Ireland is controlled by unelected agencies and quangos. As articulated by John Collison here last week, real power in Ireland has shifted from elected ministers to unelected agencies, reducing accountability and fragmenting decision-making, leading to bureaucratic paralysis. If there are more people within the system programmed to object than approve, we are goosed. Inertia sets in even as – or maybe because – public spending is rising.
With an anti-American, anti-EU, socialist president-elect, increasingly left-leaning centrist Government parties and a high-spend, high-tax united left movement led by Sinn Féin pushing for even more state intervention, Ireland looks to be heading down a Peronist road.
All we need now is a nasty dose of nationalism. But wait. We are going to get that with the push for a unity referendum. Sorted, so. Peronism North Atlantic style is nearly upon us. Is it any wonder the kids are heading Down Under?
