Australia, Argentina & Ireland: A Tale of Three Economies

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0:31David McWilliams: No bed? No problem. Why not make a Kilkenny's day trip? You could easily do Kilkenny in a day, lay trains to Dublin and Waterford Friday, Saturday, catch a panel, grab a bite in Kilkenny's brilliant restaurants and still be home in time for bed. To understand the economy, you have to understand human nature. This podcast is powered by ACAST. It's time for the podcast. John has just said off air, I love when stuff works, which is very typical of you. Do you like my new look, my Aussie look? You're looking fab. I'm feeling particularly, particularly outdoorsy. I feel like I should be wearing a singlet and playing Aussie rules football.

1:17And wearing, what are your Crocs? Don't they wear Crocs? They do, they do.

1:21David McWilliams: But I was taken aback by the extraordinary and lamentable state of their barnets. The mullet has taken over the Aussies. I know, I know. We were talking about that. It's the rugby mullet. It's the rugby mullet. I mean, in no time, in no world, has that ever been cool. Ever been a good look. No, it's a particularly bad look. But I am back. I did a 24-hour flight. Did you come down off your mushrooms or whatever you were on? I came down off the shrooms. Thanks for the Jesus. I'm not doing that stuff again anyway. Until the next time. No, but you have been travelling as well. I did. I did a little trip to France, which was fantastic.

1:57Did a bit of walking. But coming back, we were driving back up through France, through Bordeaux. Beautiful. Great night in Bordeaux. And then on our way to, we're going to stop off at Angers just before we get to Cherbourg. And I got a text from Brittany Ferries going very cancelled because of big storm out in the sea. And I went, oh no. So we had another night in Angers, which was fantastic. Got to the port, very few on the boat. And we went, it should be all right. We took a couple of seasick tablets and went out. And about an hour into a 16-hour trip, we started bouncing. And by Jesus, we were bouncing.

2:41I'm levitating off the bed and sliding down. Oh, that was terrifying.

2:46David McWilliams: And of course, I sent you a text, which was yeah exactly I texted Mac and I said oh sweet Jesus I'm in God's washing machine and Mac comes out with sage advice saying drink more wine that's it anyway we are here back in the HQ after all our travels just speaking of travels one more leg of the travels John I have in my hand The History of Money A Story of Humanity the US version of the book which I am launching I like that cover by the way the cover's gorgeous isn't it the American cover and I am launching it. So to our New York-based listeners, I am launching this on Monday, the 17th of November in the Irish Arts Centre.

3:30David McWilliams: The tickets are going quickly. Grab them at irishartscentre.org. The Irish Arts Centre, a lovely new arts centre that has taken about five or six or seven years to build and it's now open. So Irish Arts Centre, New York, Monday, and even more fascinating for me, it is going to be on the set of Endgame because the Druid Theatre are doing Endgame. Beckett. Exactly. Exactly. I'll tell you a story about Beckett. I'll tell you a story about Beckett. Anyway, in that theatre and they're doing it every night except for Monday. So we have it Monday night. So I will be delivering the history of money from the stage of Endgame.

4:13David McWilliams: Oh, that's kind of cool. Isn't it kind of cool? That is kind of cool. It's kind of cool. Yeah, yeah. I remember my brother who was studying English in UCD years ago and myself and my other brother were young teenagers or mid-teenagers and he thought it'd be, you know, a bonding session we'll go to. Take you to Beckett. And we went to Beckett and it was Crap's Last Tapes and I hadn't a clue what was going on. It was torture. It was torture. I was a 15-year-old going, what? Beckett is torture. That is the strapline of this podcast. But anyway, if you are in New York and you fancy meeting up, it is on Monday, the 17th of November, theirishartscentre.org.

4:58David McWilliams: Now, John, today's podcast is going to be an intercontinental fusion of economics, politics, history, and a little bit of futurology. Isn't it always? Well, it is. But this one, we're going to take in Australia, Argentina, where Millais confounded his critics and won, even though our mate Martine also won a seat. But Martine is wedged now between the Kushneristas, who are the old Peronists on the one side, and the Millais crowd on the other. And so, you know, Martine's room to breathe politically has been squeezed by these two. But we'll talk about that. Yeah, yeah, yeah. But the idea behind today's podcast, John, is when I was in Australia, I realized something, that Australia is the country that Argentina should have been.

5:48Right.

5:49David McWilliams: And the reason is Argentina and Australia, about 70 years ago, were regarded as the countries of the future, which is why so many people emigrated there after the Second World War. They were both enormous countries with new immigrant populations. They had lots of capital. They had lots of resources. One country, Australia, ends up doing extremely well. One country, Argentina, goes the other way. The question is why? That's the first thing. It's almost like an economic experiment, like a Petri dish. Biology class, John. A Petri dish, okay? Right? And the second thing is if we conclude as to why Argentina went one way, so it's an economic lesson in policy, history, demography, industrial policy and the way you orientate yourself to the world yeah yeah what we find is that argentina just when it was doing very well started to adopt really silly economic policies it's a warning sign for ireland because ireland seems to me to be adopting what could be described as perilous economics one perilous economic policies yeah if it can happen in argentina it can happen anywhere.

7:06David McWilliams: So it's a big intercontinental joke. And it's interesting why decisions are made at particular times and for what reason. Exactly. These are the results. So let's get into it. So it's basically Argentina, Australia, compare and contrast, okay? It's like you're leaving search biology, compare and contrast the liver flukes life cycle to the... I'm just going back into the deep recesses of your mind. And then just see, could it happen to Ireland? Yeah. And again, what I've always said in the podcast is great economies go bad and bad economies can be great. Yeah. And that's the key. Well, okay, let's start then with, you know, let's spin back a few years and see where both Argentina and Australia were back in the early 20th century.

7:57David McWilliams: Okay. So I'm going to position you, John, because you had an unpleasant boat journey. I'm going to position you on the SS Dresden. The SS Dresden. I've got those tablets. The SS Dresden, which was the shrooms and the other ones. The SS Dresden left Cork in January of 1889. The SS Dresden was built in Glasgow at a time where every ship, do you know that 78 % of all ships in the world in the last two decades of the 19th century were built in Glasgow? Right, okay. On all ships in the world. Extraordinary story. So the SS Dresden, a massive ship. On board are 38 first-class cabins. I'd be in that one.

8:41Of course you would.

8:42David McWilliams: Little Pinot Noir. Exactly. 20 second-class cabins, people in second-class cabins, and 1 ,795 third-class passengers. That's me. And that's definitely you, right? And they were all bound for Buenos Aires. Right. They arrive in Breenas Ares on the 15th of February in a place called Puerto Madero. And those nearly 2 ,000 Irish immigrants were processed to become new Argentinians. The striking thing is this was the largest group of immigrants to dock from one vessel in the entire history of Argentinian immigration. Jesus. They were patties. Yeah, yeah, yeah. All coming off the boat singing, ole, ole, ole.

9:26David McWilliams: Exactly, yeah, exactly. Where's the sangria? Yeah. Their GAA shirts. Exactly. But what happened is that the Irish and the British first emigrated to Argentina. They were followed then by 6 million more European migrants in the period 2000. Where were they from? Now, they were largely from Italy, Croatia, stroke Yugoslavia, Greeks, Jews, and Lebanese Christians. Right. Right. So there was a real melting pot. And these were pretty much the same cohort that also went to Australia. Exactly the same people. Yeah, yeah, yeah. Exactly the same people. So that was your choice, Oz or Argentina. Basically, you have the Ottoman Empire is breaking up.

10:12David McWilliams: The Christians in Lebanon say, I'm not too sure about this. We're not really sure whether the new state of Lebanon and or Syria is going to work. So we're gone, right? Let me ask you a quick question. What boat would you have got on? The SS Dresden, first class, Pinot Noir, all the way from Cove, waving at the Githyll. No, but you would have gone to Argentina. Would you have picked Argentina at the time? I think I would have picked Argentina. I think I would have picked badly, actually. I would have picked Argentina. But given that most Europeans, or not most, many millions of Europeans were moving, right?

10:48Yeah.

10:48David McWilliams: So the Jews leave around the same time. Why? Because the Tsar, I think it was Alexander Nicholas's dad, in 1870-odd, said to the Jews of Russia, you can leave. And they left in massive numbers for Argentina, South Africa, England, Western Europe, and of course, New York, where they all went, right? Then the Greeks left, the former Yugoslavs, Croats, Serbs, particularly Dalmatians left, and of course, Italians in great numbers. All to Argentina and all to Australia. So the fascinating thing is by 1950, John, Argentina and Australia were beginning to look very similar. In the case, they had European migrants, largely Latin migrants from Mediterranean basin.

11:37David McWilliams: They had Jews and they had Lebanese Christians. That was going to be the dynamo of the new Australia and the new Argentina. Nobody thought that they would go in different ways. Why? Because they all are the same. the Argentinians had massive resources of land and copper and all that stuff. And we did the podcast the other day on what the Aussies had, right? Now, in 1900, Australia and Argentina were in the top 10 richest countries in the world. And even by 1950, they remained comparable. By 1951, you could say the economies were almost twins. Everybody expected them to actually do the same thing.

12:19David McWilliams: Today, Australia, as we know, is one of the richest countries in the world. And Argentina has gone, since the Second World War, from being the seventh richest country in the world to the 77th richest country in the world. That's outrageous, isn't it? It's an absolute catastrophe, economic catastrophe. Aussies have a GDP of around$65 ,000 per head. Argentinians have a GDP of around$12 ,000 per head. Wow. So what happened? This is the question. How did the 26 million citizens of Australia who live there now, we spoke about last week, enjoy this incredible lifestyle, right? Yeah, yeah, yeah. Relatively low poverty, very high levels of standards of living, great levels of education, while in Argentina, the 46 million Argentinians, like it's twice as big almost as Australia, have seen their living standards collapse.

13:15David McWilliams: 40 % of them live below the poverty line. And 50 % of all Argentinian children under the age of 12 live below the poverty line, right? Can I just ask you, though, both are enormous countries and both have a huge amount of resources. But are the resources comparable in terms of, you know, minerals? The Aussies are probably blessed with more iron. Right. Whereas the Argentinians are blessed with far more land. Yeah. So as an agricultural superpower, the Argentinians should be miles ahead. Yeah, because of course, Australia, half of its desert. Half of its desert. Also, the Argentinians have oil.

13:55Yeah.

13:55David McWilliams: And huge, huge oil. Oh, okay. Right? They also have copper, as the Chileans have copper. So they have a bounty from the earth. Yeah, yeah, yeah. They have the people. They have the immigrants. They have the education system. They had a welfare state. Yeah. They had universal suffrage. They had all these things, right? They were also in a part of the world that wasn't affected by the Second World War. In the sense, nobody invaded them. So their infrastructure wasn't destroyed. So like the Australians, they started really with almost everything, which is why so many millions of Europeans emigrated in the 50s to Argentina because they thought this is the country.

14:36David McWilliams: Yeah, yeah, yeah. I think I'd be jumping on that boat too, actually. Yeah, the weather's great. Yeah, yeah, yeah. The wine is great. The football's great. You know, I've been to El Clasico, River Plate versus Boca. We've been to all these things. A little aside here, Mac. I know a little aside. I don't want to go down a rabbit hole here. But given that so many Spanish and Italians in particular went to both countries, Argentina ended up with a fantastic football team. Australia didn't. Because of Aussie rules, mate. Yeah, but it was. Because they created their own football. The Aussies created their own league.

15:11David McWilliams: Yeah, but you would have thought that. I would have thought that they'd be good. They'd have a half-decent team. In rugby terms, they produced a few very good Italian. David Campesi, maybe the best winger ever played, Italian, Aussie. But you are right. Yeah, you're right. But again, the Argentinians are part of the Latin world and the Latin world is a real football world. But if we come back to this idea, so why did one country deliver and the other country fail abjectly? And what warnings does this lesson have for other countries? That's what we want to talk about today. So in the late 1940s, early 1950s, the RGs changed tax.

15:55David McWilliams: So the Aussies embraced capitalism, you know, the rule of law, parliamentary system, all that sort of stuff. And they start to gradually get lucky and do the right thing. So they embraced capitalism, as we know, sort of Anglo-American capitalism. With a strong labor movement, in fairness, populated largely by Paddy's as well. Strong labor movement, again, taking its playbook really from the UK in many ways, right? The Argies went the other way. They took their playbook from Mussolini. So Juan Perón was this reasonably low level, but very, very charismatic corporal in the army. Yeah. And he was being sent to Europe by various different military guys in Argentina to see what they were doing.

16:41David McWilliams: And he was very impressed by Italian corporatism by Mussolini. So Mussolini came up with this idea. People think it was Bertie Hearn, but it was actually Mussolini, right? In his social partnership in the 1990s. But he didn't. It was Mussolini's idea that the state corporations and the unions would figure out everything together. And they'd manage the labor market. They'd manage innovation together. So that was a basic idea of Mussolini's economy. Perón was very seduced by this. He comes back to Argentina. On the face of it, it's a good idea. It is a good idea. He comes back to Argentina, and what he does is he puts into play this corporate estate.

17:20Yeah.

17:21David McWilliams: Plus, a la Mussolini, he had a bit of what I would call sing-along nationalism. It wasn't really big nationalism. It was kind of the Wolf Tones nationalism, right? Yeah, yeah, yeah. Kneecap nationalism, right? That sort of stuff, right? So, you know, when the economy is going down and things aren't going well, just ratchet up the anti-Brit thing. As we were talking about, the anti-Protestant thing that was ratched up here last week. Yes, with our presidential election. Exactly, exactly, exactly. So that was it. But they massively expanded the welfare state in Argentina. They increased dramatically.

17:53David McWilliams: I mean, they went so mad in Argentina that they started giving away sweets during elections to win the elections. I mean, it was baby kissing al fresco. It was proper populism. Really? Lads with medals, dark glasses. Yeah, here's two twirls and a Twix and a bounty bar and vote for me. And no, literally. I don't like bounty, mister. It was all that sort of stuff, right? They destroyed kind of fiscal and market discipline. They started taxing everything. All that sort of stuff. The state grew enormously. And the idea of Peronism was what I would call kind of Fianna Fáilism here. Right. If there is an ideology of Fianna Follism, it's the big state, it's close to the church when they want to be, it's nationalistic when they want to be, it is a sense that they are the state and they have been the ruling party for the longest time and their boss man, De Valera, as you said before, looked into his heart, right?

18:50David McWilliams: Yes, yeah, yeah. So it's Fianna Follism writ large with better medals, more success in football pitch, more tango, better food, asados, all that sort of stuff. But the upshot is that it destroyed the market economy in Argentina, right? And gradually and progressively, because productivity didn't rise, and when you give out sweeties when you have no productivity, it's like giving out sweeties when you have no money, when you're borrowing money to buy the sweeties to give to your mates, right? So gradually... Giving out sweeties when you have no teeth. When you have no teeth, well, you eventually end up with no teeth, right?

19:29David McWilliams: And this is where we're going to, right? So gradually and progressively, Argentina finds itself in this weird, unusual, nationalistic, self-harm regime called Peronism, which is very popular for lots of workers because people do quite well out of it. They also begin this idea called import substitution. So they came up with this great idea, which is, and it happened all over the developing world in the 1950s. They were saying, oh my God, world trade is endemically unfair. Why? Because we produce low productivity goods like agriculture. Yeah. And we trade those with the sophisticated West that produces high productivity goods, let's say like motor cars.

20:11Yeah.

20:12David McWilliams: And over time, the price of our low productivity goods will continue to fall. The price of their high productivity and high tech goods will continue to rise. And we will have to export more of our stuff to get every one of their stuff. Yeah. It's called the Terms of Trade. So they figured out that the Terms of Trade will move against us. So what should we do? We should produce our own cars. So we should produce the technology so we'd absorb the technology from the Swedes and the Germans. This is the product substitution thing. Exactly. So import substitution. So everything's imported. This is like Donny J.

20:44David McWilliams: This is straight out of Donny J's playbook. I think Donny J is Juan Peron, by the way. I don't think he's... People say, oh, Donny J is like Hitler. and Donny J. No, no. He's more like Perón. He likes ceremony. He likes symbols. He even calls his place Mar-a-Lago, sounds even Latino, the whole thing. He's Florida. He's like Carl Hyasson's best book is Florida a la Donny J. But what he wanted to do was exactly what Perón was doing. Of course, what happens is you import the technology, but you don't import the talent to keep innovating and suddenly your technology gets old. And your education system wasn't keeping up but that's kind of innovation to have proper products.

21:27David McWilliams: So Argentina goes from the seventh richest country in the world to the 77th richest country in the world. There's a thing called the Argentinian paradox in economics, which is how can a rich country with loads of resources get poor? And it gets poor by having idiotic economic policies. But can I just ask you, so they start introducing these policies. Yeah. Surely pretty quickly they would have went, actually, hang on a second. These aren't working the way we thought they were going to work. Let's reverse and let's do something else. But they kept going. They kept going. So what basically happens is money always disappears first.

22:07David McWilliams: So Argentine got capital flight. So rich Argentinians got their money out. Now what that tends to do is that tends to increase the rate of interest. Once the rate of interest increases dramatically because your banking system is fragile, because its internal capital has actually left. And why is the internal capital left? Because it knows it's about to be taxed by whom the Peronists, because the Peronists are giving out sweeties to their mates. So suddenly the culture war and an economic clash, right? As the capital leaves the country, worried about being taxed, what you have is what they call recurring current account problems, okay?

22:43David McWilliams: It means you cannot afford what you're trying to do. So typically what that country will do, it'll take the easy way out. It'll print its own currency internally. It will impose exchange controls on foreign currency externally. And it will hope to limp along. And what that tends to do, that leads to hyperinflation locally. Why? Because you're printing, printing money, and you've less and less goods to buy that money with because the goods you're producing are shite. And you can't afford the imported goods because you fixed your currency very high and the local people can't afford to buy the stuff.

23:22David McWilliams: So this tends typically to lead to pressure on the exchange rate. Everyone's trying to get their money out of the country and you have periodic bouts of currency depreciation. And then you have one last thing, which is the hyperinflation, which is local, leads to more inflation. Why? Because everything is imported. So the dollar rate of the peso is incredibly crucial because that is the price of imports. So if you've got high inflation and a falling currency, you get a double whammy. It's the story of Argentina in the 1980s. Now, all the while in Argentina in the 1980s, it didn't matter because they won the 1978 World Cup.

24:01David McWilliams: So it was bread and surfaces. It was the Malvinos War, all these things to deflect. But at the end of the day, Argentina saw itself corroded from the inside. Yeah, but the Falkland Islands happened in the early 80s as well. The Malvinas. The Malvinas. So what impact did that have economically? That would have had an even greater strain. That had a... I have been to the Malvinas Stadium, the football stadium that the local first division team of Mendoza play in Argentina is called Las Malvinas Stadium. Right. It has a big, massive mural of Las Malvinas. But again, this is all compounding the problems for the Argentinians.

24:42David McWilliams: Now, what we find is the DNA of Peronism outlasts Peron and is seeded into a guy called Nestor Kirshner, whose wife, Cristina, and this is a great Latin American fashion, the husband becomes president, then the wife becomes president. The wife becomes president twice. Classic stuff, right? Yeah, yeah, family business. It's family business. So this is what Millet is all against. Yeah. Right? So what is happening in Argentina is it's going one way because of bad choices. What is happening in Australia, it's going the other way because of good choices, in effect. Because as I said, they started exactly the same.

25:23Yeah.

25:23David McWilliams: Now you can argue Argentina was part of the whole Latin American decline and it had been somewhere else. It had been closer to the Atlantic and had not been adjoined to Latin America. But those arguments were only made after the fact. What seems to me much more likely was the policy choices. So when the RGs got rich, they thought it was going to last forever. And they decided to spend to achieve social goals, which they didn't have the productivity to do. Their massive agricultural boom, which had lasted them from the 1880s to the 1940s, 40s began to peter out. So that once in a generation windfall that had made them very rich also made them very fragile.

26:13David McWilliams: Why? Because it was all concentrated in one sector. Then as the world started to change, the European Union introduced the common agricultural policy, etc. We stopped importing Argentinian beef and Argentinian corn and wheat. And gradually, the Argentinian economy couldn't deliver the type of quality of life that people required and demanded, the middle classes. And over time, those middle classes have become hollowed out. Enter Malay. And Malay basically says, we've done 70 years of Peronism. Yeah. We've got to change. Yeah. He said, you know, I've identified what the problem is. It's the government is too big.

26:58David McWilliams: Social spending is too big. Inflation is too high. We have to stop spending. We have to get our shit together. We've got to liberalize the economy. Because the other thing the Peronists did was they actually put layers and layers and layers of bureaucracy. Bureaucracy, yeah. So Millet is not wrong. He's not wrong. Yeah. He's not wrong. It's just that he's a bit of a nutter and he has a chainsaw. He has a chainsaw and he talks to his dead dog. Yes. Through his sister, who is his medium. Yes. He's also a sexologist, isn't he? He's a sexologist, yeah. He'd be great in this problem. He'd tell us what to do, John.

27:32David McWilliams: We should get him on. We should get him on. Say, listen, Javier, we're men with some intimate problems. You know, Javier, you're the same age as us. How do you do it? How do you do it? How do you walk around like that? But last weekend, he garnered 42 % electorate. Yeah. From 3 % to 42 % of the deputies. So the Argentinians are kind of saying, look, we had 70 years of craziness. You know, if you go to any restaurants in Spain or Italy, the waiters are Argentinian. All their talent's gone. There's loads of them here as well. So the really talented ones have left. And Argentina could have been Australia.

28:12David McWilliams: That's my point. And it wasn't Australia because it made the wrong choices. So, you know, as you say, Malay's not wrong. He's identified, he has diagnosed the disease. Yeah. The disease is Peronism. The disease has crippled the country. And he's saying, look, back me because I know how to fix this. Yeah. And also his kind of madness resonates a little bit with Trump. And I just wanted to ask you about the American involvement in the recent election, because they're essentially bailing out Argentina with, what was it,$40 billion? Essentially, a$40 billion currency loan. Right. So what it's saying to the Argentinian Central Bank is we will give you$40 billion to buy your own currency with, to increase its value.

29:12Right.

29:13David McWilliams: And therefore to stabilize the panic in Argentina that the peso is about to devalue again. Okay. So that's the mechanism. Yeah, okay. So that would have had a major impact on the election. On the election, yeah. But what's America's game there? What do they hope to get out of it? It's really strange because, firstly, Millet is the anti-Trump. He's not like Trump. Trump is much more like Perón. He wants managed trade. He wants tariffs. He wants to identify certain parts of the society that he wants, and the economy that he wants to grow and expand, like chips and tech. He's very, very hard on civil liberties.

29:54David McWilliams: He's trying to increase profoundly the Supreme Court's reach over certain areas of the American Constitution. Trump is, in effect, a much more Mussolini-type character. Perón type character than our friend the mad libertarian. Millet wants the government away from anything. Trump wants big government, government spending, he's going to do this, that and the other. They're going to have a massive budget deficit this year. Millet wants the government out of everything. He wants no tariffs. He wants absolute free trade. He wants the currency to float. He basically wants to give back to Argentina a world where they started in the 1930s.

30:38Right.

30:39David McWilliams: So he's the anti-Trump, but Trump likes him because he's anti-woke, right? Yes. Yeah, yeah, yeah. And he's also a friend of Elon Musk as well. He's economically the anti-Trump. Yeah. Because libertarianism is miles away from Trumpism. Trump is Peronism. But he also hates the woke agenda, the woke mind virus, right? And he identifies wokeism as the enemy. Right. Right. And he identifies what Millet would say, the corruption of universities in spewing out all sorts of, he would describe as crazy woke ideas, which is trans rights, LGBT rights, all that sort of stuff. And as a result of that, Donnie quite likes him.

31:23David McWilliams: Donnie also quite liked to have his hair, I think. Yeah, yeah. He would like his hair and he rocks a leather jacket. He was also a member of a Rolling Stones cover band. He's got lots going on, our Millet. But the point is, he is popular in Argentina because it's the last resort, I think. But what about, you know, the resources of Argentina? Like, is this part of Trump's kind of anti-China thing? Yeah, because the Chinese are the other country that are giving the Argentinians a currency loan. Oh, right. Okay. So the Chinese have already given them currency swaps. And of course, the big fear, because China needs...

32:01David McWilliams: Jeez, Malay is playing the blinder. China needs to control agriculture. Yeah. And needs to control, in particular, the soy market. Soybeans, right? And the RGs are one of the biggest producers in the world. Right. So the RGs are playing both sides of each other. But ideologically, from the anti-woke perspective, Millet is closer to Donny. Although Xi ain't no friend of the woke agenda either. Yeah, oh yeah. But that's the geopolitics of it. You know, lots of Americans are scratching their head and thinking, we don't do any trade with Argentina. It's tiny. What are we supporting these people for?

32:39David McWilliams: So basically, it's the great game. The great game has been played again. And Argentina is a strategically important place. But I come back to the point. If you make the wrong choices when you're rich, you can become very poor very quickly. And that leads us to the paranoidization of Ireland. Yes. Well, let's pick that up after a bit of this. Okay.

33:11So, Mike, Argentina is a prime example of bad decision making, ending up with bad results and a horrendous economy. So, Ireland booming in the same way as Argentina did in the early 20th century. Are we at risk of making bad decisions and going down this road?

33:33David McWilliams: That's a really good question, John. The question is, do we become Australia or do we turn into Argentina? Yeah. On the basis that our strapline at the top was Australia is the country that Argentina should have been and wasn't. Yeah. So what we see, if you were to look at the last two or three weeks' evidence of Ireland, what we have is the peronisation of Irish politics. I think what we're looking at is because we spoke before about the windfall gain from the multinationals, the Dutch disease, the fact that this is elbowing out everything, it's jaundicing everything, this is facilitating massive increases in government expenditure.

34:16David McWilliams: You see this all over the place. And it's on current expenditure, not capital expenditure. If it was on capital expenditure, like building metros and roads and all this, grand. But it's actually on expanding. This is the John Collison critique. It's expanding the NGO class, the agencies, the various layers of government, the bureaucracy. What it's doing, we've increased government spending. So from about 1995 to about 2000, to the pandemic, more or less. Government spending in Ireland rose, on average, about 6%. So it's given we had an inflation rate of about 2 % or 3%, so it's about 3 % real increase in government spending.

34:56David McWilliams: Normal stuff, right? Since the pandemic, our government expenditure has increased to 13%. Why? Because the American money is facilitated. So the windfalls coming in from the multinationals is creating a smash and grab mentality in the cabinet because there's loads and loads of money. So what is happening is there are territorial and geographical games going on now between big civil servants, between power blocks, between what I would call this parallel force, unelected force within the state, which are the NGOs and the agencies and the various government departments and the quangos and all these things that are really growing like a wild weed deep inside the establishment.

35:44David McWilliams: And typically, typically, not always, but in many cases, the role of these quangos is to say no, not to say yes. So not to facilitate, not to accelerate, but to actually embrace stagnation. So you can't do this because we have a new regulation here and we have a new permit on this. And no, you can't do this. and the planning objections here. And what John Collison was making the point was that if we choose stagnation, we will stagnate very, very quickly. Yeah. Right? And you can choose stagnation in two ways. One is when you're poor, when you don't have the resources to do it. But the other time is when you're rich, when you have the resources to do it, but you protect what you have rather than allow the economy to grow.

36:34The rainy day fund kind of. All that sort of stuff.

36:36David McWilliams: So basically, if you look at what happened in Ireland, right, Ireland's so-called centre-right coalition, Fianna Fáil and Fianna Cael, are now far to the left of, for example, the Labour Party in England, which is a left -wing party. Now, in order to understand that, what we've got to see is that there's been a movement to the left in Ireland across many, many areas. But I would say, for example, the election of Catherine Connolly is emblematic of exactly what's happening. So the young, you have people who are pissed off. They're all going and saying this. right i don't think this is leftism i think this is peronism right right i think even introducing the irish language as the explicit language of the orus which he has done in the last while saying to be irish are you know having to go with the poor old prods yeah because you know i'm sensitive to the poor right okay um you know we're irish too anyway um all that stuff seems to me to be going towards terrorism, away from capitalism.

37:53Yeah.

37:54David McWilliams: And if you go down this route and if you put into and you embed into the expectations of society and the government that, you know, you'll get a job and the public service will expand. Don't worry, the state will give you a house. Remember the idea we talked about the state buying could be 80 % of all the private houses? Yes, yeah, yeah, yeah. So then how are those houses allocated now? They're allocated, they used to be allocated on people who save most, it's now going to be allocated to the people who queue most. So you're going to have a massive dependency. So what I'm looking at, what I'm looking at, now we have an anti-American, anti-EU, sort of tanky president.

38:30David McWilliams: And tankies are people of the left who were able to look the other way when the tanks rolled into Czechoslovakia and Hungary in the 50s and 70s because the ideology supported this. This is why she went and talked to Assad and all these guys, right? Yeah. Okay. Now, I'm not sure. Does she really matter, though? I mean, with respect. I mean, she's a president's ceremonial. I'm with you, but what I'm just saying, it's a high tax, high spend agenda. Sinn Féin are, of course, the party that have most to gain out of this. It means more state intervention. It means less, well, I would say capitalism.

39:07David McWilliams: Less people setting up their own businesses, all that sort of stuff. And over time, that's the Peronist agenda. Yeah. I mean, on the other hand, though, I can understand when the coffers, the government coffers are full to the brim. Full of American money, yeah. Yeah. But why should it not be distributed more evenly? Absolutely. But I would say that we need the basic asset test. All economics is productivity. And you take out the American multinationals and our productivity is the same as the UK. right so if the American multinationals were to in any way change their disposition towards Ireland that productivity level of the country would collapse the tax base would collapse and all these promises that we gave like Juan Perón when things were good will either be reneged on defaulted on or will be continued via increase in taxation on the people who work here yeah do we have a rainy days fund for that we have we have a rainy day fun but when it rains here it fucking rains that's true so yeah you know and all we need for peronism now is a little bit of nationalism yeah and of course what are we going to have we're going to have a referendum or agitating for the referendum on unity yeah which will ramp up all the nationalism yeah all the sort of patriotism and that's i think we leave it here is something, it's not a central case for the economy genre, the society, but it's a warning sign of the way things could go over the next five years.

40:44And we go back to where we started.

40:47David McWilliams: There is a laboratory test of what happens to these type of countries. One was called Australia, one was called Argentina. They start with exactly the same expectations, exactly the same people, more or less the same resources, except Argentina, ironically, is in a much better geographical position than Australia. And they have the resources as a kind of a, some sort of breathing space. Yeah. And Argentina fails. Australia succeeds because of the choices they make. And I look at Ireland now and I worry about the choices we are making.

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