The Failure and Triumph of Economic Complexity: Economic History of Argentina and South Korea in the Second Half of the 20th Century

Abstract

Argentina and South Korea are often used to exemplify, respectively, an exceptional episode of economic failure and a rare developmental success story of the second half of the 20th century. As it is argued in the literature, the main reasons for the economic downfall of Argentina were excessive state intervention and regulation. The authors of this article, however, presume that these were rather unsuccessful policies than fundamental problems of the Argentine economy. The level of economic complexity of Argentina was traditionally low, which was a result of an underdeveloped system of mass education and relatively sparse technology adoption. Without serious efforts to diversify its exports and increase its level of economic complexity, this country had little chance to stay among the world’s richest economies. That these efforts did not succeed in bringing about a higher level of economic complexity in Argentina did not, at the same time, imply that they were the main reason of its long-term economic stagnation. In this paper, the authors use the economic complexity theory framework to describe the development story of the Argentine economy in the second half of the 20th century in terms of economic complexity and export diversification. The authors show that this country’s efforts to develop its industry have resulted only in a minor increase in its level of economic complexity, especially if East Asian economic miracle stories—the one of South Korea in particular—are used as a reference point. The main reasons of this result include a slow pace of human capital accumulation in Argentina. This makes an immense contrast with the vast expansion of secondary and tertiary education in South Korea. Challenges of the Korean government’s new industrial policy in the mid-60s and gradual economic diversification stimulated a large-scale education reform, which made South Korea one of the most prominent high-tech economies of the modern world