The stakes are extremely high for the new president of Argentina, Javier Milei. As soon as he took office last week, he issued a series of decrees that (if approved) would dramatically slash bureaucracy and spending. Already he has eliminated price controls, limited the privileged power of labor unions, and made steps to liberalize the labor market. He also plans the complete privatization of industry.
Critics are, of course, going bonkers, and calling him every sort of name. “Fascist” is the least plausible simply because every change he has issued and proposed amounts to deferring to the liberty of the people against the power of the state.
To be sure, many things can go wrong in this reform process. These days, I’m far less willing to believe what the media says about anything, for or against, and it is always wise to look at the details before joining either a cheering squad or a lynch mob. So far, what we’ve seen looks right to me but I’m willing to be corrected.
Before people pick apart his program, assessing it according to various litmus tests from the outside, let’s get at least this much straight. The status quo is not working. Inflation is normalized as egregious. The population has lost hope. The only people with economic stability are associated with the government. The pensions are completely unfunded. The mismanagement of this country for many decades is palpably obvious to everyone.
Milei came to power promising radical reform of a different sort, not of the socialist variety but also not of the reactionary elite either, and hence neither right nor left. He has proposed a single standard for all change: does it grant more power to the state and its related interest groups or does it grant more liberty to the people? This is the right standard.
Like everyone in the English-speaking world, I’m in the peanut gallery gleaning what information I can from sources we have. I’m not denying there are landmines along the pathway to genuine reform, and his efforts can be subverted from many directions, and not just the political opposition. When stakes are this high, he probably needs to watch carefully for knives in the back from within his own ranks.
That said, he has started in precisely the right place: he is striking down as much of the administrative state as he can get away with in the first days. This is exactly where every single industrialized democracy in the West absolutely must start. It is a massive cancer on the entire developed world, especially the United States. It must be destroyed before liberty and prosperity can stand any chance at all.
“The previous leftist government had used complicated currency controls, consumer subsidies and other measures to inflate the peso’s official value and keep several key prices artificially low, including for gas, transportation and electricity. Mr. Milei vowed to undo all that, and he has wasted little time. Two days after taking office, Mr. Milei began cutting government spending, including consumer subsidies. He also devalued the peso by 54 percent, putting the government’s exchange rate much closer to the market’s valuation.”
Hold on right there. There is no such thing as “devaluation” merely by undoing currency controls. It is merely aligning the government exchange rate with the actual market rate. And by market, we mean what anyone on the street would get in exchange.
Truly, any government still using fixed exchange rates in our time is completely idiotic and evil. It is evidence that the whole government is full of criminals. It is merely government officials cashing in for more money than really exists on the market. You can know this because every government that attempts such a thing is fully aware that the real market (let’s not call it the “black market”) is offering a dramatically different rate right there on the streets right in front of every single government office.
Exchange controls are a sure sign of an illegitimate government that should be overthrown.
That said, of course, the elimination of price and currency controls is going to send prices soaring to the real rate. That is exactly what has happened in Argentina.
The same goes for labor controls. Fully half the workers in Argentina work under the table in the so-called informal sector. So for Milei to eliminate labor regulations, or merely to trim them back, is just recognizing reality. It is not engaging in some far-reaching reform. It is aligning government laws with market realities.
The next reforms are more controversial: “Mr. Milei has sought to discourage protests by threatening to cancel welfare plans and fine anyone involved in demonstrations that block roads. Human rights groups have widely criticized such policies as restricting the right to protest peacefully.”
What can be said? Let’s establish a firm rule: the use of violence by public or private entities is incompatible with the free and good society. In this case, a government that stops violent protests intended to disrupt commerce and travel makes sense. Granted this can get out of hand but the new government knew from past experience that every attempt at rational reform has been consistently subverted by violent unions. Stopping violence is, after all, a job for government.
There are some potential pitfalls associated with privatizing government industries. In the former Soviet Union, this created the oligarch class of government-connected elites that got first pick and then used their newfound assets to enrich themselves in the absence of genuine competition.
Finding new owners for privatized assets is a dangerous process that can be made less corrupt by institutionalizing and assuring rivalrous markets. So let there be a firm rule: no privatizing without fierce competition both for existing assets and allowing a full open market for all potential competitors. Only this way can reformers avoid mistakes of the past.
The dollarization problem is another major pitfall. In order to achieve this, the new government will need dollars, of course, and it is not clear that it is in any position to do this. Some people within Milei’s circle are advocates of going far beyond a “currency board” that would allow Western financial firms a foothold in the country, namely allowing full currency competition that would include any government currency plus alternatives such as any cryptocurrency too.
Of course attempting such radical reform would elicit the hate of the whole of the World Bank, the International Monetary Fund, the Fed, and vast swaths of the world financial community. Still, it is the best path to avoid the criticism that Milei has merely delivered his country’s economy into the hands of financial imperialists.
Without more knowledge on the ground, it is hard to make a full evaluation of how matters have gone so far with Argentina’s reform but, based on what we can see and understand, he seems to be on the right path. If it works, and Argentina is able to maintain its political independence even while firing up the wealth-creating machinery in a way that benefits the whole population, he will have presented a model that every government in the developed world can follow.
One final point: if Milei is genuinely serious about “anarcho-capitalism” he cannot neglect two sectors completely overlooked in Eastern Europe and Russia back in the 1990s: education and medicine/healthcare. These two sectors are hobbled everywhere in the industrialized world. They desperately need market forces and a full recognition of private-property rights, including an elimination of all monopoly privileges. Will Milei go that far? We can hope.
