Posted November 20, 2023
By Sean Ring
Milei Shocks The World
I must first warn you: South America is my big blind spot.
I’ve never been there; I’ve never really wanted to go other than to round out my travel credentials.
Also, I’m not an expert on Argentine politics. The country has been a basket case economically for my entire lifetime. Argentina was the only country in the world's top ten largest economies in 1900 not included in the same list in 2000.
But like the bold twenty-first century votes of Brexit and Trump, Javier Milei’s election is the strongest signal an electorate could send in a country crying out for change.
There’s no good reason for Argentina to suffer from 142% inflation. It’s a rich and beautiful place with much to offer.
Will Milei make good on his promises? Will the Argentines revert to voting for incompetent Peronists in the next election? Only time will answer those questions.
But for now, here’s why I’m excited for Argentina.
Things Going For Milei
Economic Liberalization: Milei advocates free-market policies, including minimal government intervention in the economy. This includes reducing taxes, deregulation, and encouraging entrepreneurship. Straightaway, this should give the Argentine economy a shot in the arm. After all, if taxes and regulations are meant to reduce smoking, what do you think they do to entrepreneurship and income?
Personal Freedoms: People value individual liberties and work better when their government doesn’t harass them. Milei's stance on personal freedoms, like freedom of speech and expression, aligns with this principle.
Opposition to Authoritarianism: Milei has criticized authoritarian tendencies in government and advocates limiting the state's power. This is a danger when dealing with China, as I’ll elaborate on below.
Monetary Policy: His focus on sound monetary policy, including criticism of inflationary practices, aligns with the goal of a stable, non-inflationary currency.
Interestingly, Vivek Ramaswamy tweeted, “Just a century ago, Argentina was one of the ten wealthiest countries in the world. Today’s Argentina suffers 124% [sic: it’s 142%] inflation & loses economic migrants to other countries. Congratulations to Javier Milei. Now, the hard part begins. May the spirits of Mises & Hayek be with you.”
Milei wants to dollarize Argentina’s economy. I’m not a big fan of the idea. But before you laugh or gag, as a first move in recovery, this may make sense. If he removes the volatility of the Argentine peso from the buying decision, Argentina’s exports will increase, which is a must to get Argentina’s economy back on its feet.
The enormous drawback is that he nor his country no longer controls its currency.
Reduction of Government Size: Milei's proposals to reduce the size and scope of government, including cutting public spending, are core goals to get back to small government.
And here’s one fantastic reason to love Milei:
Keynes said that when you have an earthquake, you should jump for joy because you will generate such a huge boost in demand that you will be much richer, which is obviously nonsense … The stupid Krugman says similar things, and he has a Nobel Prize in Economics. He says that he doesn’t believe in aliens, but that if there is going to be a great depression, he is going to beg them to come and invade us so that we can spend.
Things Going Against Milei
It’s not all roses for Javier Milei. There’s talking. And then there’s doing. And then there’s getting subordinates to do the stuff you need to get done. Donald Trump utterly failed in this regard (not firing enough of the Deep State who should be on trial for treason).
Here’s where Milei will have trouble.
Practical Implementation: The practical implementation of Milei's policies will face significant challenges in the Argentine context, potentially leading to short-term economic hardships or social unrest. In short, there will be a lot of former government officials who are now unemployed, and he will have to deal with that.
Social Issues: If Milei's policies lean too heavily on economic freedoms while neglecting social liberties, he’ll infuriate the Woke Left. While that makes me smile, Milei must deal with the inevitable fallout.
International Relations: His approach might strain Argentina's international relations, especially with countries or organizations that favor more regulatory or interventionist policies.
Milei has already come out on the side of the United States (and Israel) and wants to dollarize his economy.
But calling China an “assassin,” further alienating your most significant friend, rival, and trading partner, Brazil, and then saying you’re pulling out of BRICS seems a bit silly to me.
Milei’s ability to conduct sensible foreign policy will be critical to his program to reform the Argentine economy.
Market Fluctuations: Chalk this one up to “events.” Events are uncontrollable, and all politicians fear them. Extreme free-market policies sometimes lead to increased volatility and inequality, which, although consistent with laissez-faire principles, might create social issues. If he tames his central bank’s printing capacity, this will help. Again, he’ll have to deal with this.
Public Services: Drastic government size and spending reductions might lead to underinvestment in essential public services. The conversion from publicly provided assistance to privately provided goods and services will take time… and a good salesman.
In summary, Javier Milei's election and policies align with principles I wholeheartedly support, particularly around economic freedoms and reducing government intervention.
However, the practical challenges of implementing these policies in Argentina's complex socio-economic environment present notable obstacles.
Milei’s rhetoric got him into the presidency. His management skills will keep him there… or not.
In any event, I wish the Argentine people the best of luck!
Have a lovely week ahead.