The Economics of Argentina’s World Title
Of GOAT, goats, and promises - fulfilled and unfulfilled
In 2001, Argentina was on the verge of a default. With the economy in disarray, the parents of a young boy in Rosario were about to make a momentous decision, one that would - and I write this with no exaggeration- change the course of the history of world football. A battered home currency and dwindling prospects made a family decide to emigrate to Spain to continue training and growth hormone treatment for the deficient little kid who was already turning many heads at the academy at Newell’s Old Boys football club with his footballing skills. The club could not pay for the medication as the Argentine Peso collapsed and the country sunk into hyperinflation. Again. That family was the Messis.
From that crisis of 2001, you can draw a long, winding line to the night of December 18, 2022 in Lusail Stadium in Doha where Lionel Messi delivered what was long ordained as his destiny - a World Cup for Argentina. The consequence Messi’s soujourn to FC Barcelona, and his eventual enrolment at the Spanish club’s hallowed La Masia academy was that he honed himself into perhaps the most magical footballer the world has ever seen, capable of superhuman feats on the pitch that even other greats would not dare contemplate. The hero’s journey was born, in part, of an economic crisis, and its latest epic triumph comes as the country battles another.
Argentina is no stranger to economic crisis, and most of them follow the same pattern - the government’s inability to rein in its spending leading to excessive borrowing (especially in foreign currency) precipitating a currency crisis that leads to soaring inflation. No one can satisfactorily explain why that happens over and over again, much like there are no satisfactory explanations as to why, despite having some of the most talented footballers on the planet, the country had last won a World Cup in 1986. The sentiment is superbly captured in Nobel Laureate Simon Kuznets’ famous quip - “There are four kinds of economies, developed, underdeveloped, Japan, and Argentina.”
So, will winning the World Cup in such dramatic and emotional fashion in 2022 make a difference? Research suggests it might. According to a paper by economist Marco Mello, the World Cup winner often sees higher exports because of greater international visibility after the title win, and the eventual effect could be as high as a 0.25% extra growth in the country’s GDP. For a country that holds the world record for the most number of years of negative GDP growth1, even 0.25% extra growth could mean a huge difference. But those are the technicals. The lasting impact could be that of confidence. Argentines have always been emotional, more so when it comes to football. An Argentine comedian on Twitter implored “Argentina’s witches, do your thing!”, when the World Cup final penalty shootout began. Their economic troubles also have emotional roots.
Back before the Great Depression and the Second World War, Argentina was a thriving economy with a huge export market of livestock (it was mainly beef they sold to the rich in Europe and the United States, but they exported goats too ;)) and other agricultural products. But the Depression destroyed the meat export market, and the economy collapsed, until a certain Juan Peron (VERY much related to Eva Peron of Don’t Cry For Me Argentina2 fame) took over. Argentina pivoted from a relatively free market economy to one that was heavily nationalised and propped up by government spending on welfare. Then, in 1976, the democratic government - then led by Isabel Peron, Juan’s third wife who had taken over after his death - was ousted by a military regime, that brutally ruled until 1983, even hosting the World Cup under controversial circumstances where the home nation won their first title in a final marred by terrible refereeing and gamesmanship.
Throughout all this, there was one sure shot sign of economic weakness that persisted - high inflation. The rate of inflation is effectively an indicator of how confident people are in the strength of a currency and the institutions in an economy that hold it up. For reasons that are too complicated to get into here, Argentines have always ended up with very little faith in their currency, their central bank and their government. Without a stable currency and a trustworthy banking system to guide resource allocation, a modern economy can’t grow. Economic hardships, uncertain inflation that could wipe your life’s savings out in a week, or bank collapses became a fact of life - something one had to learn to live with. As Jonathan Wilson writes in his magesterial history of Argentine football “Angels With Dirty Faces”, “The result of a lack of trust is a spiral of short-termism”. In other words, it’s hard to be hopeful of the future, or even contemplate it.
Amidst the gloom and doom, football was the great escape, the here and now, and the big release. And failure after failure on the world stage only dented the confidence further. It seemed like an unbreakable shackle of economic and sporting misery. Back in 1989, when things became so bad that inflation touched 3000%, the country did try to reform its ways, with the government led by Carlos Menem going ahead and tying the value of the Peso to the Dollar. The 1990s were rather stable and hope was rekindled for a brighter future. But then the country spiralled again, and the 2001 recession in the United States meant Argentina was back in the throes of a crisis, the very same that drove Lionel Messi to Barcelona.
Inflation, even as millions celebrate the World Cup win in the streets of Buenos Aires and elsewhere in the country, remains at around 80%, unemployment at almost 25%. But this win, delivered by Messi, as much as it was delivered for him by his teammates may yet leave an economic legacy for his country, by the sheer hope and optimism it might ignite. Argentines have always believed their inability to capture the Jules Rimet trophy again since Diego Maradona held it aloft in Mexico was the result of a curse, a hex placed on them. And this world cup, the faithful fans kept chanting “Anulo Mufa!” that translates to something like “I counter-curse your curse” or”I annul your curse”. The anti-jinxing of the jinx seems to have worked. And it is possible, it might spur a level of goodwill that might translate into reforms and action from the government, and economic growth thanks to people and businesses feeling more optimistic about the future.
After all, one of the closing lines in the anthem - “Muchahos” (the no. 1 song in Argentina on Spotify during the tournament) - sung by Argentine fans at this world cup goes “Muchachos, ahora nos volvimos a ilusionar.”
“Guys, we are hopeful again.”
By some counts, Argentina has had 23 years of negative economic growth since 1960, placing it ahead of even severely underdeveloped economies like Chad and Zambia. Argentina’s living standards were among the highest in the world by per capita income standards about a century ago; today, it still lags behind those levels it achieved over a 100 years ago.
He was married to Eva Peron, whose life later became the subject of the musical Evita, which included the song Don’t Cry For Me Argentina