Census shows Argentina´s economic decline is greater than projected

The first results of the 2022 Census have been published. Argentina’s population is 47.3 million people. The projections made by INDEC based on the previous census were 46.2 million. Therefore, the first significant contribution of the 2022 Census is that it showed that 1.1 million more people live in Argentina than estimated.

In economics, it is understood that a society develops when its per capita income grows. Per capita income grows due to three factors. One is population growth, meaning that more arms and more brains produce more. The second is capital growth (investment), meaning that more arms and brains with more equipment and technology produce more. The third is efficiency, understanding that more arms, brains, equipment, and technology, well organized, make it possible to produce more and more with the same effort. This last factor –efficiency– depends decisively on the quality of the institutions or rules that govern society.

With the information provided by the 2022 Census, it is possible to analyze what happened to these variables that determine the country per capita income. Taking the data from the Census and the Ministry of Economy, between 2010 and 2022, it can be observed that:

• The total population grew at an average rate of 4% per year.
• The employed population also grew at an average annual rate of approximately 4%.
• The Gross Domestic Product (GDP), i.e. the total amount of goods and services available in the economy, grew at an average rate of 2% per year.

These data show that the total population and the employed population in the labor market grew at a much higher rate than the modest increase in the production of goods and services. The fact that output grew less than the employed population indicates that the other two determinants of development – capital (investment) and efficiency – made a negative contribution to output. This leads to a fall in productivity, as the quantity of goods and services grows less than the population. This is the key to explaining the economic decline and the structural persistence of poverty.

Throughout the last decade, the investment rate was around 16% of GDP. An emerging country needs investment rates of at least 25% of GDP and sustained over time if it aspires to develop. In the case of efficiency, it was negative due to the adverse productive environment. Among other aspects are macroeconomic instability, the distorting tax and regulatory structure in general, and the outdated labor rules governed by 40-year-old collective bargaining agreements. The combination of low investment and low efficiency is closely associated with the growth in the last decade of 3 million employed persons, half of which were in public employment and the other half in self-employment. Salaried employment in private companies remained stagnant.

The fall in productivity is a by-product of the poor organization and functioning of the State. If the public sector functions poorly, the private sector necessarily functions poorly too. The malfunctioning of the State is the result of the fact that in the last decades there was no discussion concerning bad public management. On the contrary, strong consensus prevailed around misguided policies. In particular, having public spending consistently higher than revenues –generating inflation, indebtedness, and macroeconomic crises– and not giving the importance that the quality of public management deserves –generating massive waste of public resources–.

The execution of the 2022 Census illustrates how public sector mismanagement negatively affects private sector productivity. A non-working day was declared, work was prohibited, people were required to stay at home while waiting for the census taker (when 50% of the families had already completed the Census digitally), and, worst of all, many people reported that the census taker never showed up.