[I am relaunching my unpopular blog. Nothing like a dated nationalization from the archives to excite my readers]

Don’t Nationalize Me Argentina

I have been following the recent decision of Argentina to nationalize a major Spanish natural resource investment. Background on the decision can be found here. (Note: I say “Argentina” since this decision was proposed by the President and passed by an overwhelming majority in both houses of the legislature.)

The European response includes direct sanctions on Argentina for the expropriation along with a recent escalation of an existing trade dispute within the WTO.

A number of theories are floating around about the timing of this decision, but the one striking fact is that public opinion polls show that the majority supports this expropriation.

This pattern of popular nationalizations may seem like an obvious political decision. There are clearly cases of nationalizations during fiscal and financial crises. In a little preliminary data analysis with some of our graduate students (Chi-yi Lee. Noel Johnston, and Hadi Sahin) we actually find that nationalizations are less common during periods of crisis. This fits previous research on the choice of governments to liberalize (trade and capital account) during financial crisis.

Why is Argentina different? What explains different government responses to crisis?

Right now I have more questions than answers. This might be the difference between academics than pundits. Questions, questions, questions.