When I was developing economic consciousness growing up in New Zealand I used to think the worst thing that could happen to my country was what happened to Argentina: a rich country at the beginning of the 20th century that went into long term decline because its political system was so dysfunctional. (At the start of the twentieth century we were both equally rich southern hemisphere countries exporting agricultural products a long way to northern markets.)
The Argentine analogy is back, in The Economist this week, with "lessons for many governments from one country's 100 years of decline":
“When people consider the worst that could happen to their country, they think of totalitarianism. Given communism’s failure, that fate no longer seems likely. If Indonesia were to boil over, its citizens would hardly turn to North Korea as a model; the governments in Madrid or Athens are not citing Lenin as the answer to their euro travails. The real danger is inadvertently becoming the Argentina of the 21st century. Slipping casually into steady decline would not be hard. Extremism is not a necessary ingredient, at least not much of it: weak institutions, nativist politicians, lazy dependence on a few assets and a persistent refusal to confront reality will do the trick.”
Luigi Zingales has an excellent book on how some of these risks play out in the US: A Capitalism for the People (2012). Zingales is an academic at the University of Chicago who left Italy to escape the corruption, drawn to America for its "meritocracy." Now he thinks America is heading down Italy's path.
