Plain-speaking is a hallmark of the Bush administration. Treasury Secretary Paul O'Neill said bluntly that the United States stopped loans last year to economically crippled Argentina because "they just didn't reform."
The directness of the remarks, which caught many by surprise at the World Economic Forum, sent a message: no good money after bad. Argentina has defaulted on $141 billion in debt, but wants $20 billion more.
The carrot-and-stick approach failed dismally. A predictable supply of International Monetary Fund bailouts allowed the government to postpone a reckoning and prompted risky private investments.
U.S. taxpayers should not underwrite that money pit.
Yes, the government has announced "reforms" - floating of the peso, cuts in government spending, and a gradual ending of the bank holiday. Other "reforms" in the early 1990s that privatized business brought a wealth of investment and business activity. From 1991-94 annual economic growth averaged 7.7 percent.
However, one may not order up capitalism a la carte and expect its benefits to persist. The government did not practice fiscal discipline; wages and benefits were dictated not by markets but by fiat; taxes were horrific.
Most importantly, a rule of law that furnishes confidence and thus favors prudent risk-taking by fully protecting property rights was absent. In Chile, by contrast, private property now is well protected. Its Gross Domestic Product is twice what it was in 1989.
Let's see if Argentina has enough wit to hear Mr. O'Neill's astute message.
