The Constitutional Economy of Dynamism and Inclusion: An Inquiry into the Causes of Argentine Economic Decadence

Abstract

The constitutional structures and traditions that promote corporatism are the main obstacles to economic dynamism and inclusion in societies. Corporatism is the cause of Argentina's "reversal of development" from the 1930s to the present. If the normative and imperative rules in Constitutions change both incentives and culture, some questions arise: how should we design Constitutional rules that promote economic dynamism? At the same time, is a bad political economy, as occurs in a corporatist economy, promoted by government officials because it allows their perpetuation in government? A corporatist economy could be the basis of a perverse political culture where utility-maximizing leaders will embark on destructive economic policies to enhance their own personal power unless they are appropriately constrained. The Argentine Constitutional economy has both poor incentives and a poor Constitutional culture, which prevent the development of both dynamism and inclusion. Strategic political considerations push rulers into bad economic policies. At the same time, a strong corporate culture favours the resulting mix of authoritarianism, stagnation and social exclusion.

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