Argentina Kills the Golden Goose

Thursday, April 3rd, 2008 5:54 pm by Neal

(Hat tip: HR)

Can we make a humble suggestion that just might save trillions of dollars, millions of lives, and immeasurable grief and anguish for so long as humans inhabit the planet?

Let’s require every President, Prime Minister, Dictator, Monarch, Potentate or Grand Poobah to read the book Atlas Shrugged before they assume the office. We’ll leave it to others far smarter than ourselves to figure out how to enforce this requirement.

We make this humble recommendation because, frankly, we’re getting tired of the never-ending spectacle of “grand socialist utopias” which rise in haughty, ignorant idealism only to crash and burn back to reality. Over-and-over-and-over again, as day follows night, hunger follows socialism, and the pattern repeats as endlessly as the celestial one.

The latest incarnation comes from Argentina. Investor’s Business Daily brings us up to speed with the situation, There Will Be Hunger In Argentina:

It may sound like common sense to us, but we aren’t Argentina’s irrational new president, Cristina Fernandez de Kirchner, who suddenly hiked taxes to 44% on soy and sunflower exports just as crops were about to be harvested. It was the third tax hike on farmers in six months, but she denounced Argentine farmers’ protests as the acts of “coup plotters” in a “protest of plenty.”

Her grab at farmers’ profits, along with her aggressive leftist rhetoric calling for “redistribution” of profits, so offended ordinary Argentines that some 250 pot-banging protests erupted across the country this week against her arbitrary move at farmers. The supine media covered almost none of them, but word got out anyway.

The three-week farmer’s strike is real enough — blocking roads, leaving ships empty at the docks and contributing to food shortages in the cities. Still, the government refuses to back down. …

How did it come to this? First, consider that Fernandez is dangerously ignorant of the impact of taxes on any business, having spent her entire life as a politician in cities. Combined with the concentrated power of her Peronist party, which controls every institution in the country, it’s little wonder that she has little inclination to listen.

But declining production is likely to be its own message. Already, there is so much micromanaging of Argentina’s agriculture that the only profitable areas left are in relatively uncomplicated export crops of soya and sunflowers — 70% to 90% of which are exported.

But three tax hikes on exports in six months, along with VAT taxes, income taxes, capital costs and salaries, are likely to leave no net profit for Argentina’s last dynamic producers in agriculture.

The whole agricultural picture is a nightmare of government meddling. In the cattle sector, for instance, Argentina doesn’t allow exports of prime cuts, regulates the weight of prairie cows, yet subsidizes feed-lot cattle. It’s gotten so bad that Argentina’s world-famous beef exports are virtually halted, while its market-friendly neighbor, Uruguay, has snapped up what had been Argentina’s markets. Tiny Uruguay sells more beef overseas than Argentina now.

Poor Argentina. How sad that your wonderful, world famous beef market has been devastated by government fools like Cristina Fernandez de Kirchner. Argentina has killed the goose that laid the golden egg. Americans, don’t think for a second that it can’t happen here.

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