The Day Argentina Decided to Decline

Marcos Falcone

On this day 81 years ago, as Argentina was under a military dictatorship, thousands of protesters gathered in the Plaza de Mayo in Buenos Aires to demand the release of Colonel Juan Domingo Perón. As vice president, he had been arrested by his own colleagues as he gained popularity and his presidential aspirations grew. But after the large demonstration on October 17, thereafter known as Loyalty Day by his future followers, Perón was released, and it became clear that the rules of the political game in Argentina would never be the same. 

What may not have been so obvious is that, well into the 21st century, Argentines would still be paying the price of that change.

Nearly a century before, the constitution of 1853 had initiated an era of economic liberalism that had kept Argentina comfortably among the ten richest countries in the world for several decades, from the late 19th century to the early 20th century. Its institutions were far from perfect, as there was electoral fraud and corruption. But the state did not pretend to plan the economy, and entrepreneurs were, by and large, free to “have a go,” the condition Deirdre McCloskey identified as critical for growth. The Argentine economy, increasingly integrated with the world, was built on exports. That was where the country’s comparative advantage lay.

By 1945, Perón was no newcomer—he had already taken part in an earlier coup in 1930. A skilled politician, he used his post as secretary of labor under the dictatorship inaugurated in 1943 to adopt a series of measures that won him the unions’ favor: forcing companies to raise wages in urban areas, freezing them in the countryside, creating a labor court system staffed with friendly judges, and more. That was what the masses were celebrating on October 17.

Nor was Perón particularly original. Sent to Italy for training before World War II, he had been enthralled by Benito Mussolini, whose fascism he described as a “great contemporary spiritual movement.” But his sympathies for Nazi-fascism were not unique to him, and neither was his support for growing state intervention in the economy: corporatism and protectionism had already emerged around the world with the onset of the Great Depression. Still, as historian Roberto Cortés Conde wrote, nothing influenced Argentine life in the second half of the 20th century as much as Peronism. 

If October 17 matters, it is because Perón took an incipient corporatist-protectionist system to its extreme. State intervention had slowly increased before him, but once he was elected president in 1946, he went all in. Before the decade was out, public spending exceeded 45 percent of GDP, a level never before seen in modern Argentina. During his tenure, the central bank’s reserves fell by 75 percent, also without precedent. Foreign trade was monopolized by a state that, at first, kept more than half of exporters’ earnings, while import tariffs reached an estimated record of 500 percent by 1950. Expropriations were wide-ranging, from media outlets and railroads to pension funds.

It is no surprise that enormous subsidies could be handed out or that real wages for industrial workers could rise 35 percent in Perón’s first three years, but that policy was completely detached from economic reality. In the public sector, high spending could be maintained only by seizing one source of funds after another, which Perón did; in the private sector, higher salaries could only be paid if business owners were compensated, which the government also did through subsidized credit and utilities, and tariffs designed to benefit manufacturing. 

To pay for it, Perón turned to inflation, which had disappeared decades earlier, but that was not enough. In the end, with unfavorable export prices, he himself had no choice but to impose austerity. The recession was as fierce as the initial boom: by 1955, wages either returned to their starting level or ended up even lower than before.

If this cycle sounds a lot like Argentina’s present, it is because those who benefited from peronist policies, namely industrialists and the now-powerful unions, were not about to give their benefits up so easily, and so the peronist system outlived its creator. While Perón was ousted in 1955 by a coup and the peronist constitution of 1949 was annulled, its central elements were incorporated in 1957 by the military itself through an addendum to Article 14, which remains in force today. The non-peronists that followed also closed the economy from the world, implemented industrial planning, and rejected Argentina’s comparative advantage. When Perón returned to power in 1973, of course, he practiced Peronism again.

The persistence of this corporatist-protectionist system had a clear result: in 1945, Argentina’s per capita GDP was double Spain’s, but by 1990 it was about half. The country fell behind practically all of its former peers. By closing itself off, Argentina rejected the trade integration that took hold worldwide after World War II. And despite several attempts at opening the economy in recent decades, it has never fully reopened.

Before Perón, politics served the economy; afterward, the economy served politics. October 17 is the birth certificate of that inversion, and so the date’s real importance lies not in the events of that day but in what they left in its wake: a mistaken idea, state-planned industrialization, which created economic conditions that remain extremely hard to reverse to this day.

Argentina has begun to undo that legacy. The Milei administration has balanced the budget, brought inflation down from triple digits, and enacted hundreds of deregulatory measures. It has also started to lower export duties and reopen the economy to trade and investment. But the work is far from finished. The productive private sector is still burdened by heavy taxes, export duties, higher-than-average tariffs, and dense regulation. The interest groups that depend on a state-run economy, from protected industries to entrenched unions, resist nearly every change.

The legacy of October 17 is as palpable as it is sad. Those who went to Plaza de Mayo on this day 81 years ago could not foresee how events would unfold, but that did not make them any less tragic. This date should serve as a reminder of how urgent it is for Argentina to continue reversing the course it set on that day.

This article is based on a version that first appeared in La Nación on October 17, 2026.

Source: https://www.cato.org/blog/day-argentina-decided-decline