Javier Milei isn’t ‘hard Right’. He could be Argentina’s free market saviour
There are not many good jokes in economics, but there is this one: there are only three different economic systems. Capitalism, socialism – and Argentina.
The country was among the wealthiest in the world at the start of the 20th century, beginning to catch up with the United States as an emerging global power. For the hundred years since, it has been synonymous with economic mismanagement. The election of the radical libertarian Javier Milei could start to change that.
Sure, Milei will be vilified by the liberal-left as “hard-Right”, even though he is nothing of the sort, and he will face huge opposition from the IMF, the World Bank and the Davos crowd – all of which are committed to the big state, high regulation orthodoxy. And yet there is just a chance that he could turn the tide back towards liberal free market reforms. The global economy could certainly use that right now.
In the end, the vote was not even close. In the run-off this weekend, the radical free market libertarian Milei easily defeated his Peronist opponent Sergio Massa. By next month, he will be installed as Argentina’s president.
It is hardly an enviable task. This year, the country’s inflation rate hit 143 pc. It has been printing money like crazy to finance vast welfare spending. The currency has been in freefall, with the peso collapsing to 357 to the US dollar, compared to 164 a year ago (and just 38 five years ago). It has been patching together emergency support to avoid defaulting yet again on loans from the IMF. It is a mess. Against that backdrop, it is hardly surprising that the country voted for radical change.
Milei is certainly that. An outspoken TV host, former singer in a Rolling Stones tribute band, and an occasional coach in tantric sex, he is far from conventional.
Describing himself as an “anarcho-capitalist”, he has promised to take a “chainsaw” to the state, planning to engineer a 15pc drop in the percentage of GDP spent on government, to ditch the peso completely and use the dollar as the country’s currency instead, abolish the central bank, reduce labour protections, and cut taxes.
Think Kwasi Kwarteng on roller-skates. It promises to be quite a ride.
Argentina’s new president is routinely described as “far right” by the mainstream media. In reality, he is nothing of the sort.
He may be extreme, but only because he is a hardcore libertarian, who has no time for the state running anything. It is impossible to see anything “far right” about any of his policies.
The peso has hardly been a very successful currency, and getting rid of it shouldn’t be any more “right-wing” than replacing the franc or the lira with the euro, even if it may prove harder to achieve.
With interest rates at 133pc, it is hard to argue that Argentina’s central bank has been a huge success, or that there is anything “fascist” about replacing it. Indeed, his Peronist opponent as finance minister abolished income tax for almost all workers in September, a move that could just as easily be seen as “right-wing” or “populist”.
And Milei may surprise us all. By far, his hardest task will be “dollarising” the economy without enough of the American currency to go round. He may end up with a peg, or just use Bitcoin instead. If he can pull that off, however, he will stabilise inflation far more successfully than the central bank has done. The rest of his proposals are eminently sensible.
Argentina’s bloated state needs to be trimmed back, the web of subsidies needs to be ditched, tariffs need to be dropped, markets need to be opened up, crony capitalism needs to be dismantled, and the country’s abundant natural resources need to be used to fuel a return to growth. The world’s second largest shale gas fields in Patagonia could be used to create an energy boom if properly developed.
Of course, he will face plenty of opposition. Civil servants, and state semi-monopolies will block him when they can. The IMF which endlessly indulged the lavish spending of the Peronists will oppose him, and so too will the World Bank, along with the rest of the Davos establishment.
Milei may well find he is overthrown by the financial markets, and the IMF certainly won’t be coming to the rescue, and neither will the Biden administration in Washington. His presidency could easily prove a dismal failure. And yet, Argentina is a naturally wealthy country, with abundant land and resources. It won’t be very hard to improve its prospects.
The genuinely interesting question is this: could he trigger a global return to liberal free market reforms? Argentina is hardly the country you would choose for a bold experiment. It has failed and failed again, and whatever the opportunity always found a fresh way to bankrupt itself. And yet, that said, the bar is so low that it won’t take very much of an improvement for it to start looking a lot healthier.
For the last 20 years the tide has been in favour of big states, cheap money and over-regulated economies. That has been true in Obama and Biden’s US, across the EU, and of course in the UK as well. Government has become steadily bigger and bigger, taxes have increased, and central banks have printed more and more money to pay for it all. In Argentina, the results of those policies have been ruinous, and over time they will be in the rest of the world as well.
If Milei can engineer only a modest recovery in the country’s fortune, stabilise prices, slim back the state, and start to raise living standards, it may well mark the moment at which the tide started to turn back towards free markets – and Argentina, surprisingly, will be the country that led the way.
