When a country goes bust, the pain is felt on very deep levels. The most basic systems and institutions that people have come to depend on simply disappear. Power companies stop operating, the police stopped working, gas stations close, grocery stores run out of food, postal workers stop delivering mail, retirement checks stopped coming, and banks close their doors with bankers fleeing the country, taking people’s life savings with them.
This is what happened in Argentina in 1999.
Argentine president, Carlos Menem, bought into some of the IMF’s latest thinking about how an unrestrained capitalist market would be the ultimate recipe for success. However, without proper checks and balances, businesses will thrive at the expense of the country, and the general population will suffer.
In Argentina’s case, wealthy people took their money and fled the country. Over $40 billion left the country in one single night. This resulted in a run on the banks, followed by a collapse of the country’s national currency. Argentina’s citizens were so desperate and panicked that many spent nights sleeping in front of the automated teller machines.
In reaction to this, the government froze all bank accounts for one year, only allowing people to withdraw minor amounts of $250 per week.
In December 2001, confrontations between the police and citizens became a common sight, and fires were set on some of the main roads in Buenos Aires. President Fernando de la Rúa declared a state of emergency, which just led to more conflicts and turmoil.
Eventually, the situation became so chaotic that President Fernando de la Rúa fled an enraged mob by helicopter.
Many private companies were also affected by the crisis. Argentine Airlines, as an example, was hit hard, and forced to stop all international flights, on several occasions in 2002. They came close to bankruptcy, but managed to survive.
The unemployment rate soaring to nearly 25%
An estimated 30,000-40,000 of the newly homeless and jobless survived by scavenging the streets for cardboard to eke out a paltry living by selling it to recycling plants.
Many barter networks cropped up to compensate for the widespread shortage of cash, and large numbers of people began to rely on them.
Argentine products were rejected by some countries, for fear they might arrive damaged or in poor condition.
Agriculture was also affected. The USDA put restrictions on Argentine food and drugs arriving at the United States.
Producers of television channels were forced to produce far more reality TV shows because these were so much cheaper to produce. Virtually all education-related TV programs were canceled.