We seem to be in an era when countries and economies are voting in elections or choosing in decisive policy formulations, to opt either for strong medicine and an early cure from economic and fiscal afflictions, or to dive into palliatives and homeopathic displacements, to defer the inevitable. The stern headmaster of the first school is the Prussian chemist and daughter of the Lutheran clergyman, German Chancellor Angela Merkel. The most rebellious pupil, throwing chalkboard brushes and calling for mayhem, (as faithfully to her national tradition as Frau Merkel is to hers), is Argentinian President Cristina Kirchner.

Europe -- despite the exposure as delusional of its more extravagant pretensions to imminent return to world paramountcy just a century after it led the world's descent into the hell of world wars and Great Powers governed by Nazis and Communists -- is today a grand and noble vision that enjoys general adherence across Europe. The burial of ancient national animosities and the concerted drive of the old continent toward union, sane democratic government, and economic policies at least based on a recognition of grade three arithmetic, is rightly seen as an inspired departure from centuries of bloodshed and in most countries, chronic misgovernment.

Germany, in the interests of being embedded benignly in a friendly Europe, consented to have its pockets picked by weaker states (starting with East Germany). And people who should have known better, agreed to the fable that debt denominated in Euros would have the same yield, whether issued by Germany or by Greece, succumbing to acute Europhoria. These errors are being painfully assimilated and the burning question is whether France, the Eurozone's second economy, walks off the edge and elects a mad, mediocre, Socialist escapist as president, rather than the erratic but not entirely delusional incumbent.

Latin America has an even more appalling history of political incompetence, venality, and buffoonery than Europe, and has no current organizing principle other than a widespread recognition that it is time for the region to stop being the awkward under-achiever of the western world, floundering around and blaming everything on the Gringos. In its political incontinence, it has been barely distinguishable from sub-Saharan Africa and the least politically salubrious Muslim jurisdictions.

At the end of World War II, Argentina had a standard of living almost equal to Canada's. Developed by British interests as a source of beef and wheat, populated largely by Italians and Germans, with no racial problems, (because there had never been an economic rationale for slavery and all the natives were massacred or expelled early on), Argentina seemed predestined to great things. It all went horribly wrong.

In the decade after World War II, Argentina was kidnapped by the political general Juan Peron, who learned the populist military swagger from Mussolini as an attache in the Argentinian embassy in Rome in the '30s, and by Peron's glamorous, crowd-pleasing wife, Evita. Peron was evicted by the military in 1955 after he had looted and over-regulated the country, fallen out with too many factions in the officer corps (who had not seen real combat for generations, and not much then), and after he attacked the Roman Catholic Church. Even in exile abroad, Peron was the dominating presence in Argentina and, incredibly, was brought back in 1974, aged 79.

Peron died after a few months, and the ever restless generals made short work of his current wife, a Panamanian former show-girl who had been elected vice president with him, and tried to be president. A brutal military dictatorship was imposed as the country again teetered in an internecine struggle between the military and the left. The generals were sent packing by Margaret Thatcher when they seized the Falkland Islands and were routed by British forces. At least, since then, Argentina has managed to maintain regular democratic elections, but between ostensible Peronist faction heads, as, for no obvious reason, the Perons occupy an iconic position in the country's political mythology a little like that of Mao in China.

Argentina started out cautiously with civilian government and in 1991 it wrestled inflation to a low point and pegged the peso to the dollar at equal value, and even proposed to adopt the dollar as the country's currency. Alan Greenspan, in one of his better decisions, thought not. But low interest rates soon led to wildly excessive borrowing and spending, a false boom, a real bust, deep recession, and the selection of a hard-money reformer, Fernando de la Rua, as president, in 1999.

But the government clung to a now impossible exchange rate, and Rua fled the presidential palace in a helicopter in 2001, (a relatively dignified departure compared to General Juan Carlos Ongania, president in the late '60s who was dismissed and sent away in a taxi by his fellow-junta members, and left to pay the fare himself). After three presidents in four days at the end of 2001, Argentina formally defaulted on its foreign debt, an event which was received in the country's Congress and has been officially hailed since as the triumph of Latin American popular democracy over the colonial overlords of the northern hemisphere.

Since 2003, the leftist Kirchners, the incumbent and her late husband, (she has staged a reverse of the Perons, dressing in black as a grieving widow, but the departed Nestor Kirchner was no Eva Peron as a darling of the mobs), have ruled and have promoted economic growth over monetary stability and have taken the traditional Latin American aversion to economic facts to unusual extremes. In three years, the peso has gone from 3.3 to the U.S. dollar to 4.4, a 33 per cent decline against an already declining currency. Consumer prices have accelerated from a 15 per cent inflation rate to a 25 per cent rate today. Subsidies are used to cushion the most politically sensitive necessities from the worst of inflation; the palsied weapons of capital controls and extreme import restrictions have been used to try to mitigate the flight from the peso, and oil prices have been suppressed by about 40 per cent from the world price. (Collecting books from abroad requires a personal appearance at the point of entry and an $80 payment, even if what's being imported is only a pamphlet.)

Argentina isn't efficient enough to be a successful manufacturer even in South America, and is essentially a commodity -- especially a soy -- economy, and it has benefited from supplying the Brazilian boom (which is generally based on real productivity increases). After the default, Argentina can't borrow from normal sources. It did receive some loans from Venezuela's Chavez, but at what proved to be uncomradely rates. The National Statistics Institute is under public orders to produce phoney figures, and Mrs. Kirchner has raided public pensions, and now, with a redefined mission and an outright puppet as governor, the government can take from the Bank of Argentina 20 per cent of its revenues and up to 12 per cent of the money supply (which it is constantly increasing).

The customary last act in these timeless Latin American farces is when the beleaguered leader, harassed as if by Coleridge's albatross by the inexorable irritations of arithmetic, plays the nationalist card. Mrs. Kirchner has now pulled out that stop, threatening (unspecifically) the Falklands again, and renationalizing the country's oil company, YPF. (Having been privatized and sold, mainly to Spanish interests, it has been subjected to severe price controls, to which the owners responded by reducing their promised exploration budget. Mrs. Kirchner has seized on this to justify her grab.)

Argentina remains a rich country, and a member of G-20 because of its potential, not its performance, but it is accelerating toward the abyss, aligned with Cuba, Nicaragua, Venezuela, and Bolivia (whose fatuous president Evo Morales, has taken to claiming that his country's Mcdonald's outlets are CIA posts), all basket cases, as the Guevaran dream perishes in an excruciatingly prolonged and histrionic death agony. Brazil, despite leftist polemical flourishes, Mexico, Colombia, Chile and Peru are the future, having substantially overcome terrible misgovernment and in some cases, civil war. Ecuador and Uruguay are hedging, hearts on the left and minds in the centre. Argentina, which should lead the continent out of 200 years of geopolitical irrelevancy, inexplicably, never learns. For some countries, as for some people, experience is a slow and severe teacher.

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A Matter of Principle
by Conrad Black