The violent popular uprising in Argentina and abrupt collapse of its government should be understood as a warning bell, reminding the governing elites how unstable–and unjust–their system of globalization remains. Unfortunately, the Washington establishment prefers instead to dwell on its global war against terrorism. The Bush Administration’s battlefield successes in that war, its diplomatic victories in the new trade round launched at Qatar and the House’s narrow approval of fast-track negotiating authority for the President seemed to confirm America’s self-image as benevolent steward of the world.

When Argentina exploded, it should have blown away the smugness, but instead we witness once again the supple forgetfulness that allows the globalist architects of the IMF and their cheerleaders to skip past obvious contradictions in their ideology. Argentina, one has to recall, was toasted not very long ago as the best case for “responsible leadership” in the developing world. Its regime included the requisite “Harvard-trained economist” as finance minister, who advanced the same austere measures that Washington demanded from the sinking Argentine economy: Squeeze the populace as harshly as necessary until capital accounts are balanced so foreign creditors may feel protected from devaluation or default (they are now likely to experience both).

The Argentines endured quite a lot–four years of recession, unemployment approaching 20 percent, shrinking incomes and public spending–until they swarmed screaming into the streets, looting supermarkets and battling police, with many casualties. Now, Eduardo Duhalde, Argentina’s fifth president in two weeks, has lashed out, blaming US-backed free-market policies adopted in the 1990s for the country’s collapse. “Argentina is bankrupt. Argentina is destroyed. This model destroyed everything,” Duhalde said in his inaugural speech.

The central fallacy exposed by the ruination of Argentina– and the many previous cases like Russia and Mexico–is the presumption that poor nations should accept the global system’s commanding dictates, occasionally including massive suffering in the name of financial order, and in return the system will make them rich (or at least less poor). In Argentina’s case, the straitjacket was sincerely accepted in the most extreme terms: Its currency was rigidly bound to the value of the American dollar. This commitment was widely praised by US economic thinkers, and it did stimulate US banks and investors to lend more generously. But it encouraged foreign lending to swell to impossible dimensions–$132 billion in Argentina’s case–followed by the inevitable economic deterioration as the dollar soared and Argentine exports ceased to be competitive. The IMF prescribed its usual austerity remedy while lending billions more to cover the debt obligations–thus giving more time for the foreign debtors to be repaid before the inevitable default.

The story of Argentina is baffling, and deeply infuriating, because it is so familiar. Yet sensible reforms, like capital controls on the creditors and alternative economic strategies for developing nations, remain topics for learned papers and polite conferences, not for real action. There is an obvious explanation: IMF policy may ruin many borrowers, but it serves the creditors, who are able to evade the full consequences of their folly. Perhaps if many more nations follow Argentina down the road of debt default, the creditors will also see something wrong with the system and demand change.