When politics matter: Economic stabilization in Argentina and Israel

This is an attempt at a systematic comparison of the heterodox stabilization plans instituted by Argentina and Israel in 1985. Despite the remarkably similar stabilization plans instituted, Israel managed to dramatically reduce its inflation rate, while Argentina’s experience was exactly the opposite. This article suggests that the explanation for the different outcomes can be found in the variations in state power, autonomy, and capacity. In israel, state power was more effectively mobilized to pursue the goal of stabilization than in Argentina, where the state was riddled by special interests and lacked any semblance of cohesion.