He was taking too many risks. He didn’t have enough political support. And his radical version of free market economics didn’t offer any solutions anyway, especially in a world where the state is more crucial than ever. When Argentina’s Javier Milei won the presidency last year there were plenty of predictions that he would fare as well as Britain’s Liz Truss. And yet, there are signs the medicine is starting to work — and that will be globally significant.
Over the past couple of weeks, the data coming out of Argentina has been far better than anyone expected. This month, inflation is forecast to dip below 10 percent — admittedly a month-on-month figure — compared with a high of close on 300 percent earlier this year. Last week, Milei announced that the country had recorded its first quarterly budget surplus since 2008, a modest 0.2 percent of GDP, but still an astonishing achievement in such a short space of time, especially for a country that has run deficits for 113 of the last 123 years. “If the state does not spend more than it collects and does not issue (money), there is no inflation,” the president told his critics. “This is not magic.”
It is still early days. There are protests on the streets and the trade unions are mobilizing. The Milei administration may well collapse in chaos, as so many Argentinian governments have before it. And yet, there is also an increasing chance it will succeed. In reality, Argentina was such a mess that it only takes fairly modest reforms to create a dramatic improvement.
If the Milei medicine works, there will be two lessons from that for the rest of the world. First you have to be genuinely radical to change the direction of an economy. Milei has closed government departments wholesale, scrapped rent controls overnight and freed up prices. It has been shock therapy. Next, he has shown that radical free market reforms can work very quickly. You don’t have to wait for years. The results can start coming through in months.
If Milei succeeds he might even set a trend. In a world where policy makers in the US and Europe assume the state is more important than ever he is taking a very different path. Heck, who knows. Perhaps a few other governments stuck with zero growth and huge deficits might notice what Milei is doing, and follow his example.
This article was originally published on The Spectator’s UK website.
