What happens when a Western economy dies

IF YOU want to know what happens when a 21st century economy crashes, ask an Argentinean.

When their currency, the peso, which had been artificially pegged to the dollar, had to be devalued in 2002, savers lost 70 per cent of the money they had kept in their bank accounts. With the government forced to default on payment of its huge, unmanageable debt and unable to bail out the banks, Argentina went through four presidents in a fortnight.

Before this disaster struck, in the prosperous 1990s, you couldn't walk anywhere in Miami without bumping into well-to-do Argentines, preppy pastel sweaters draped over their shoulders, spending their easily earned dollars in the city's swishest malls. But after the crash, proud, well-dressed people who had nostalgically considered themselves members of the first world - Argentina was once one of the world's ten wealthiest nations - were reduced to queuing for soup.

With almost a quarter of the population forced out of work, some skilled factory workers formed co-operatives and commandeered the businesses that had been abandoned by their bosses when the economy bombed. For others, the only way to scrape together £10 a week was to sell cardboard to recycling plants for under 10p a kilo. So every night, the cartoneros, a new 40,000-strong underclass, came in from the suburbs with trolleys and scoured the streets of Buenos Aires. All this in a city once called the Paris of the South.

Crime - and sales of self-defence courses and burglar alarms - soared. Copper from phone lines, aluminium from traffic lights and even the bronze plaque on a celebrated statue of Christopher Columbus were stolen for their value as scrap metal. When truancy rates dropped at primary schools around the country, it was because the children didn't want to miss out on what was often the only meal of their day.

The crisis was indiscriminate. Overnight, the educated, European-minded middle-class became nouveaux pauvres. For one businessman in his fifties who had owned three perfume shops before the crash, this meant driving a taxi from five in the morning to eight at night. Well-dressed women took pots and pans to bang in protest on the streets where they used to shop. Second-hand furniture shops filled up with ornate mahogany tables, chandeliers and Art Deco antiques - family treasures now going for a pittance.

With jobs unattainable or paying barely anything, the enterprising  young either escaped to Spain and Italy, the countries from which their grandparents had emigrated, or got menial work serving burgers or selling clothes. Meanwhile, just as had happened in Prague in the 1990s, filmmakers, writers and artists from around the world rented studio apartments for a third of the price they would have paid back home. Enclaves of Buenos Aires with names like Palermo Hollywood and Palermo Soho quickly became cosmopolitan and trendy.

The success of the film industry was a rare positive. Just as the post-war depression in Italy spawned Neo-realism and films such as Bicycle Thieves, a new wave of Argentine directors started making personal cinema which examined how ordinary people responded to reduced circumstances. One such, Carlos Sorin's Bombon El Perro, tells the tale of a jobless mechanic who regains his lost pride when the pup he adopts wins a local dog show. As one filmmaker said, "Everybody was hurt, so their skin was open." The crisis had a less impressive impact on the small screen. Strapped for cash, television executives swamped the listings with game shows and cheaply produced reality TV programmes.

In one of these, Human Resources, a telephone vote would decide which desperate contestant deserved a job helping to make croissants at a bakery. Thankfully, nobody in Britain, America or even Iceland believes their recessions will ever get that bad. But a decade ago, neither did Argentineans.

Since the turmoil, Argentina has steadily recovered. Though protest is still an everyday occurrence, the rise to power of populist president Nestor Kirchner - and then his wife Cristina - has at last brought political stability. The country's debt  repayments were skilfully restructured by economist Roberto Lavagna.

Eventually, the cheap devalued peso made Argentina a great place to do business. Foreign investors returned and the country built up a healthy trade surplus. And with its vast swathes of farmland on the pampas, Argentina has profited from the rising global demand for food. The Chinese, especially, import a lot of soya and oil seed. Until recently, GDP was growing at an average annual rate of almost nine per cent, and Argentina shouldn't suffer too badly from the current global financial downturn.

That isn't to say that the county's problems have all disappeared. They haven't, and the most enduring repercussion of the 2001 collapse is widespread disenchantment with the entire political class. ·