Monday, 11 August 2008

Economic / psychological patterns

Further to my earlier post, I've also been reading a bit about the recent reports that by the "Big Mac index" Buenos Aires is now "more expensive than the US". Of course the Big Mac index is a limited and western-centric measure that is probably best ignored.

However, reading through the responses I was struck by the post on Buenos Aires through my eyes. Specifically with reference to the psychological effect of being able to say a country is equivalent (or as expensive) as the developed world and how that is a familiar state for Argentina harking back to the days when the peso was pegged to the dollar. I remember growing up in South Africa in the 80s and 90s and how the nation's obsession with the exchange rate preceded the nation's obsession with crime.

Every day the Rand/Pound exchange rate was discussed, on the news, at school, at dinner parties - everywhere. In 1990 R4 bought you a pound, today you need R14. This gradual decrease caused concern for large swathes of the population (mainly white South Africans).

I can't help but feel that the concern in South Africa was more about the growing feeling that the country was drifting away from it's (then, perceived) European - "developed world" status to that of a developing nation, where inevitable the local notes carry a few extra zeros. As foreign holidays to the "mother country" become more and more expensive, coupled with increased cultural isolation - the affect of sanctions and boycotts - the "health" of the Rand became a key measure of how the country was doing, measured of course from a militantly Euro-centric perspective.

Realistically, of course it is only one economic indicator and the health of nation was better understood with a broader perspective of all the factors. Although rand/dollar or rand/pound conversations are still commonplace in South Africa I do think that the country has come a long way in accepting it's "recalibration" of status, focusing on local influence and an international status where appropriate.

I'd read a few years back about how Argentina had "recalibrated" itself after the 2001 crash, focusing on local relationships rather than the historical obsession with Spain. I'm not sure how accurate that account is, but certainly South Africa has benefited from a regime change that is ethnic and cultural. I'm not sure if Argentina would find such a transformation as definitive.


Federico said...

Its true that the 1 dollar = 1 peso illusion of the 90s made people belive we were in the first world. This is mostly because it was cheap to travel abroad, to buy the latest technology. Even a low-middle class guy could save some money and go to other latin american countries or even europe on holidays. For example it was cheaper go and spend your holidays in brazil than in bariloche or other places in argentina. You could affor better service, buy more stuff and people though you were rich.

It was the reverse situation than we have now with also an artificial exchange rate and artificial low prices. Tourism grew the last couple of years because Argentina is (or was) quite cheap.

And argentina didnt have an obssesion with spain, until a few decades ago we where much better than them economicaly speaking. We where indeed obssesed we europe overall, and england in particular.

Justin said...

Australians are similarly obsessed with the US dollar exchange rate. Funnily enough the pound is hardly noticed.

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