Javier Milei, the recently elected ultra-right-wing president of Argentina, infamous for his wild rhetoric, has shaken the political fabric of the nation and the world. Milei’s political and economic stances are vastly controversial and differ starkly from those of the past century’s ruling parties. His rise to power was sudden and unexpected but comes at a time in which Argentina’s economy is experiencing record high inflation and slow economic growth. So the question that must be asked is: Can Javier Milei spark a crucial turnaround in Argentina’s economic and political state, or will the country fall deeper into ruin?
On November 19th, 2023, Javier Gerardo Milei, a 53-year old Argentine native, beat fellow candidate Sergio Massa with 55.69% of the votes in a historic landslide election to assume the presidency of Argentina. His election suddenly disrupted the country’s traditionally two-party electoral system. Prior to his election, the Unión por la Patriav (Union for the Homeland), a political coalition that follows a center-left political ideology called Peronism, and the Juntos por el Cambio (Together for Change), a vaguely centrist/right-wing coalition, dominated Argentina’s political stage in past years. This political environment remained rigid until Milei and his own coalition called La Libertad Avanza (Freedom Advances) rapidly rose in popularity, stealing the spotlight from the prior two parties.
While there are many different factors that led to his political rise, such as how he gained the endorsement of former President Mauricio Macri, a key player in Argentine politics and the founder of the Juntos por el Cambio, and how he utilizes disruptive rhetoric to catch the eye of the public, especially of many young men, the biggest factor that led to his election was his promises of economic change and his exploitation of the political and economic failures of past Peronist leaders.
So why is that a big deal? Well, Argentina has been in a state of economic ruin for decades. Inflation has been rising at a constant rate for over twenty years, with the past four years seeing some of its fastest-ever inflation growth as a result of the COVID-19 pandemic and internationally higher food and energy prices. Prior to Javier Milei’s takeover, inflation was at roughly 160%, its highest since 1989-1990.
The beginning of Argentina’s rapid inflation can be attributed to a 1980s debt crisis that forced the central bank to increase the money supply and decrease interest rates, resulting in rapid inflation that has refused to quit to this day. That being said, deeper economic issues have stemmed all the way back to Juan Perón, president of Argentina from 1946-1955 and 1973-1974 and the man Peronist ideology is based off of. During his presidency, Perón adopted protectionist values: he nationalized key industries and increased trade barriers all to promote domestic corporations and goods. These ultimately limited access to foreign products and investment, severely draining the nation’s treasury. Furthermore, while he improved working conditions and advocated for women’s rights, these efforts involved increased social spending and worker benefits, resulting in greater inflationary pressures.
However, many of Argentina’s economic troubles are also a result of strong British economic influences in the 19th and 20th centuries. For instance, the U.K., under Prime Minister Clement Attlee, refused to execute a planned transfer of British pounds to dollars which Perón knew would have strengthened Argentina’s international trade and investments. All of this has resulted in deeply seeded economic issues that have contributed to the high inflation Argentina is experiencing today. High inflation means each unit of money, the peso for Argentina, has a lower value. As a result, Argentina’s ultra-high inflation has resulted in a massively diminished purchasing power among civilians causing many to hoard U.S. dollars instead. The central bank has been forced to increase its benchmark interest rates parallel with inflation with the most recent rate being at an astonishing 80%.
On top of this, Argentine leaders have implemented financially unsustainable programs. For instance, Argentina has massively subsidized healthcare, energy, education, and transportation, all of which the government afforded through printing more pesos which resulted in even greater inflation. High inflation and high interest rates, among a gamut of other issues, have made it much more difficult for Argentina to pay off debt, resulting in a multitude of defaults with its largest being in 2001 when the government defaulted on $132 billion. Argentina during these defaults relied on IMF (International Monetary Fund) bailouts, which have added roughly $30 billion of more debt onto the nation. As a result of all of this, foreign nations have withdrawn or reduced their financial support and investments in Argentina. The fraud, bribery, and a lack of transparency among Argentina’s Peronist leaders have further worsened the nation’s economic plight. As a result of all of this, Argentina’s economy has long contended with frequent recessions, limited reserves, high poverty rates (45% as of the year prior to Milei’s election), and large levels of debt.
Argentina’s inflation rate in the past 10 years (Graph: INDEC)
Javier Milei promises to change all of this. Often described as an “anarcho-capitalist,” Milei plans to cut government spending by 15% of GDP, remove almost half of government ministries, dollarize (replace the local currency with the USD) Argentina’s $600 billion economy, eliminate the nation’s central bank, and privatize many domestic corporations. As roughly 90% of Argentines benefit from government-subsidized social programs, transportation, and more, Milei’s drastic cuts will certainly impact the living standards of many. At the same time, diminished spending would decelerate the nation’s spiraling inflation. Milei’s plans to dollarize the economy would also reduce inflation by replacing the depreciating peso with the more stable dollar, eliminating the need for the central bank. However, this poses many problems. For one, the central bank lacks sufficient dollars to cover the pesos currently in circulation. Furthermore, eliminating the central bank would make Argentina’s economy dependent on the stability of the U.S. economy and the Federal Reserve.
While he dislikes this title, Javier Milei is a Neoliberal. His economic stances fall in line with Neoliberal ideology, which calls for deregulation, increased privatization, free trade, tax cuts, and reduced government spending. The ideas behind each of these are as follows: deregulation allows corporations to operate more freely and efficiently, leading to lower costs and therefore lower prices for consumers; privatization, which means selling state-owned enterprises to private owners, introduces competition and profit incentives, driving efficiency and quality; free trade removes trade barriers, increasing competition and reducing prices for consumers; tax cuts incentivizes investment and job creation for wealthier individuals or businesses; and lastly, reduced government spending decreases inflation, lowers interest rates, and stimulates economic growth. Javier Milei’s economic proposals certainly fall in line with many of these policies.
So what has Javier Milei done during his presidency so far? He followed through on his promise of minimizing governmental control by slashing 9 of the 18 ministries. Milei also devalued the nation’s currency by 50%, cut state fuel and transportation subsidies, paused public infrastructure projects, and eliminated regulatory rules. On December 20th, 2023, Milei declared an economic emergency, allowing him to bypass Congress to pass various measures. The emergency decree that Milei created is composed of 366 different articles.
Among these measures are steps to privatize Argentina’s state-owned companies, to reduce regulation around healthcare and other sectors, steps against labor rights and unions, and more. However, this emergency decree was struck down by a labor court who argued the decree did not meet the standard of emergency necessary to bypass such a legislature. While Milei’s administration has since appealed the decision, the decree has yet to pass.
Milei also introduced an omnibus bill of 644 articles. Among these are measures to privatize 41 public companies, a 15% tax on most exports, and a proposal declaring a one-year state of emergency that would grant Milei power he otherwise would not have had. In the future, it is almost-certain that many of his proposed bills and policies will not pass Congress. His coalition, La Libertad Avanza, has only 7 senators in the 72-seat upper house, just 38 deputies in the 257 Chamber of Deputies, the lower house, and lacks any governorships in the nation’s 23 states. His omnibus bill, through several days of debate in Congress, was reduced to only roughly 300 articles, with many related to fiscal reforms being removed. As a result, Milei withdrew the bill from consideration after many critical measures and articles were further removed from the bill.
Javier Milei’s emergency decree suffers setbacks in court (Photo: Erica Canepa via Bloomberg)
In the short time frame of Javier Milei’s presidency, Argentina’s economy has already experienced some drastic changes, and it’s for the worst. Inflation is now currently at a staggering 276%, a three-decade high, and poverty at almost 60%, a two-decade high. Milei claims that these economic downturns were the fault of prior administrations, not his own. Considering the fact that two of his biggest acts, the emergency decree and omnibus bill, have been blocked or withdrawn, there might be truth to Milei’s statement. In order to see the effects of Milei’s Neoliberal economic policies, we will have to wait and see. However, in recent months, inflation has decelerated on a monthly basis to 13.2% in February from 25.5% in December, something that Milei has taken credit for.
At the moment, Javier Milei has been unable to successfully implement his desired economic policies and Argentina’s economy has only worsened since the start of his presidency. However, looking at examples of Neoliberalism throughout history offers a glimmer of hope. The U.S. under former President Ronald Reagan’s economic policies, called Reaganomics, led to significant economic growth in the 1980s and reduced inflation. The U.K., under former Prime Minister Margaret Thatcher, experienced similar economic growth in the 70s and 80s from her own Neoliberal policies, called Thatcherism. That being said, Argentina’s economy is worse off than either the U.S. or U.K. during their respective periods of economic growth. Thus, Javier Milei has a far more difficult task in reviving Argentina’s economy. But Javier Milei is a breath of fresh air for most Argentines and his economic policies are undoubtedly radical. Perhaps Javier Milei is just the man to pull it off.
