Can Javier Milei Shift Argentina Out of Its Petronist Rut?

While there are political obstacles, does Javier Milei have the political courage to get Argentina out from under its Petronist yoke?

November 27, 2023

By: Bobby Casey, Managing Director GWP

Milei Argentina pulled one out of a hat in their last presidential election with Javier Milei and his running mate Victoria Villarruel. You have a self-proclaimed libertarian and a civil rights attorney holding these positions in a country that still gets a wry chuckle when you hear the occasional German last names.

I think it’s great, and I absolutely will be following this administration.

As we all should.

I think there will be a bit of political pragmatism that dims his light, however. I’m not expecting ideological purity in practice, in large part because he’s not a dictator. He answers to a congress and a national constitution.

The mere idea that he has an entire country excited about abolishing government agencies is still more than any other country has going for it right now.

The US, while frustrated with all the Marxism and socialism, still has this weird strain of patriotism running through it where they cannot imagine a world of patriotism without boot licking. Milei is talking about abolishing full federal agencies.

The only person even saying that in the US other than Ron Paul is Vivek Ramaswamy. No one else is talking about shrinking the government in any substantive way.

What made Milei so striking was the contrast to every other candidate, combined with his irreverent attitude toward the leftist policies that brought their once wealthy country to its knees.

South America is like the Middle East, pigeonholed into contemporary misconceptions by people who think human history started in 1995.

But for those who know their history, they also know their potential. They were great once, they can be great again.

Argentina was the 10th wealthiest country in the world around 1950. Much like Venezuela which, around the same time frame, was busy being the 4th wealthiest country in the world.

It was regarded as the land of opportunity for many Western Europeans… until it wasn’t. I don’t understand why people in prosperous nations fall for the idea that they should feel guilty for being prosperous, but they do.

Capitalism and Socialism are having their reputational battles in the marketplace of ideas and then some stupid politician gets it in their head that there’s a “third way”.

The third way has literally been fascism every damn time. Every. Damn. Time. And how on earth do you come out of World War 2 even entertaining a “third way”? Argentina did exactly that. They voted in a president, Juan Domingo Peron, whose sole policy was reckless spending and even more reckless money-printing and borrowing.

And this has been their albatross since. It can’t keep investors. It has over 140% inflation. It’s not wonder that Javier Milei could run on a platform basically saying, “Y’all Mother F*ckers need Mises!”

Here’s the thing, practically speaking. I’m as anti-government as the next anarchist, but I also realize that if the government reeled itself in enough, anarchism would be a much harder sell. There is a modicum of government that many people are willing to tolerate, if they see just a measure of return and benefit.

When I tell people that taxation is theft, its defenders immediately retort with, “What about fire departments and roads!”. My response is that they are grossly mismanaged. But what these defenders of taxation are referring to is how they ideally wish to have tax dollars administered. So if such an ideal were met, people would be content to continue with that.

Most countries that have seen great prosperity did so with governments in place. But they did so without all the bureaucracy and administrative nonsense.

That appears to be the agenda of Javier Milei. He won’t win on abolishing the government. But he won on the promise of sounder economic policy. The people who got him in were younger. Their inheritance is on the line, and it looks like crap. Argentina is hundreds of billions of dollars in debt. Its people are buying things like it’s the end of the world because the things they are buying carry greater value than the currency they are using to buy it.

Sad that Argentina had to get to such a level of desperation to course correct, but it will be interesting to see what Milei can do.

He might manage to flip a lot of state-owned and operated institutions to the private sector:

The president-elect also proposes to radically reduce the size of the state, which doubled under Peronist governments over the past two decades. The day after his triumph, Milei confirmed his intent to privatize the majority state-owned energy company YPF, national news agency Telám, national radio station LRA Radio Nacional, and publicly owned television network TV Pública. “Everything that can be in the hands of the private sector will be in the hands of the private sector,” Milei said during a radio interview. He argued that there was no space for gradual reforms; instead, he said “drastic” measures were needed.

The federal agencies he listed to oust are within his power to eliminate under executive decree. So if nothing else, the “AFRUERA” doctrine might be the one thing he pulls off!

If it’s anything like the US, that will help them pay down their debt considerably.

Financial Times reports:

Milei’s biggest challenge is to dismantle an elaborate web of price and currency controls spun by the outgoing Peronist administration without triggering hyperinflation and economic collapse.

That is precarious. And Milei’s initial gusto to eliminate the Central Bank and Argentinian peso in favor of dollarization has waned a bit.

The man he initially had in mind to lead their central bank, Emilio Ocampo, turned the job down because of Mile’s equivocation:

Emilio Ocampo, an economic history professor and former investment banker, was the leading advocate within Milei’s team of dumping the Argentine peso in favour of the US dollar. The author of a recent paper advocating dollarisation, he had been working on a blueprint to implement the plan after the new government takes office on December 10.

To be fair, there are logistical challenges to dollarization. There is a congress to win over. There is the amount of USD Argentina would need in hand to covert to dollars which is estimated to be between US $35bn to $50bn.

And then there is the matter of trade. It’s one thing to say, “I don’t do business with communists”. It’s another to actually find a way around that. How do you burn the bridge with BRICS, when you share a border with Brazil and need customers?

His inauguration is on December 10, 2023. This will be an interesting case study for libertarian politics.

I don’t find myself on the side of the state or politics. But when you see someone aggressively coming for the state, even in a state capacity, there’s nothing unprincipled about cheering for it. Honestly, cheering for economic recovery in a place like Argentina is not antithetical to libertarian principles.

And if he is successful in slashing down the size of government, the entire world should take notice and follow suit. What happens when you get rid of the Department Cultural Blah Blah Blah? Nothing? Great. Here’s you’re pink slip.

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