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The economy would crash, the markets would be in open revolt, and he would swiftly be evicted from office by the IMF, and replaced by some “grown-ups.” When Argentina elected its chainsaw-wielding, libertarian President Javier Milei a year ago, the economic and political establishment confidently predicted he would only last a few weeks. And yet, not only has Milei managed to stay in power, all the evidence suggests that he is turning Argentina around. The real question now is this: will stagnant and moribund western countries pay attention?
With inflation running at 25 percent a month, with the largest IMF loan in history to pay back, and with the currency in freefall, the Argentina that Milei took over had become synonymous with mismanagement and decline. From abolishing subsidies, to scrapping rent controls overnight, to abolishing whole ministries, Milei embarked on a dramatic program of shock therapy designed to dismantle state control. He has not delivered on everything. The currency has not been replaced by the dollar, for example. And yet, he has done far more than most observers thought possible.
The results? Pretty good so far. Inflation has fallen to slightly over 2 percent per month, a stunningly low figure by Argentinian standards. The budget is back in surplus. The credit ratings agencies have started to upgrade its ratings, while downgrading countries such as France. Output is finally starting to expand again. Perhaps even more surprisingly, Milei’s support is increasing, with a 52.3 percent approval rating, according to the Tendencias consulting firm.
Milei keeps on going, and shows little sign of losing his radical edge
Milei keeps on going, and shows little sign of losing his radical edge. Only this week, he fired the head of the tax authority from trying to impose levies on digital influences and streamers. In his view, the last thing governments should be doing is going after people trying to make some money for themselves.
The West spends a lot of time debating how to reboot its stagnant economies. We debate industrial strategies, subsidies, creating “green jobs,” and developing partnerships between the state and industry. We assume complacently that the best we can hope for is to slow down the rate of growth of government spending, with actual cuts considered politically impossible. And governments look around more and more desperately for ways to raise taxes, or to borrow more, without considering whether there might be other options.
True, Argentina was in a far worse mess than anywhere in Europe right now. But France with no government, and a vast budget deficit despite collecting 45 percent of GDP in taxes, Italy sliding back into recession, and the UK where taxes on businesses have killed off any prospect of growth, are heading the same way. One year in, Milei is demonstrating that a radically different set of solutions is possible. Who knows, perhaps at some point the rest of the world will start wondering if he is doing something right.
