Argentina’s growing economy

In late 2023, a desperate Argentina turned to an unusual choice to lead the country. Instead of choosing more statist leadership of the style of Juan and Evita Peron from the past, Argentinians struggling under the yoke of triple-digit inflation elected the anarcho-capitalist soccer player turned economist turned politician, Javier Milei. Milei struck an attention-getting figure both for his Wolverine style haircut (shaped by the invisible hand, he said) and for his five enormous canines (one original and four clones).

Milei came in with a literal chainsaw in hand insisting that he would cut and cut government programs until inflation could be tamed and fiscal reality could be respected. His colorful personality and sharp rhetoric insured a great deal of media coverage, but what would happen when the time for talking passed and experience would begin to provide the measuring stick for the success of his policies.

We are beginning to see the answer. About a year and half into his presidency, the raging fire of inflation spurred on by the government’s printing of currency and unsustainable spending has been increasingly tamed. Inflation that reached a peak of 25% per month has dropped to a low of 1.5% a month—still too high, but a tremendous relief for a country where the inflation threatened chaos. Milei’s determination to impose fiscal discipline has been exactly what a beleaguered people needed. His hand strengthened by success, it looks like Milei will have the opportunity to carry out a demonstration project in Latin America that could help Americans and others get their fiscal houses in order.

The Argentinian leader is not a miracle worker. Cutting bureaucratic jobs and reducing government spending does little to improve the plight of the poor in the short term, but it is the kind of brush-clearing and foundation repair that has to happen in order to facilitate the flourishing of the whole people. Acknowledging the short-term pain, one observer referred to the pre-Milei economy as “a bomb waiting to explode.” In other words, something had to be done. Milei has been the man to do it. Now, in the wake of cuts, Argentina will experience an estimated economic growth rate of 5% this year, an impressive feat when government spending goes down and has to be replaced and exceeded by private sector activity.

There is something important in the story of Milei and Argentina that all countries and their citizens should observe, which is that intentions must be measured against performance. We have become deeply enamored of the idea of government largesse in economics, which is attached to heavy spending regardless of deficits. In the United States and elsewhere around the time of COVID, some influential figures began to promote the idea that governments could print money with impunity to provide universal basic income and other benefits free from any expectation of work. Had not the printing presses engaged during COVID yielded shocking price increases, such discussions would still be gaining ground. We were beginning to believe in a kind of wishing makes it so kind of magical thinking, which is well-intentioned but potentially ruinous.

Milei’s story merits special attention, though, because his actions run counter to the usual sort of social justice narrative. In the typical narrative, a government of the type headed by Milei’s predecessors would deserve praise for their determination to redistribute wealth, extensively regulate the economy, and to rely heavily upon government as the instrument of wealth creation.

Milei more perfectly fits the picture of the villain in a social justice kind of story. He cuts government jobs, cuts regulation, and cuts government agencies. But who benefits from the arrest of runaway inflation? Is it not the poor and the elderly who are crushed the most by unstable, constantly rising prices? And who benefits when a nation returns to economic growth? Who will fill the vast quantity of new jobs that will emerge in a vital, organic economy? It will be the ordinary people of Argentina. Milei’s extreme action ends up having a benevolent effect, regardless of the critique that may be leveled at him. And that, of course, is his intent. He has taken on a hard battle and has done so to save his country, not to harm it and its citizens.

Despite his radical actions undertaken to save the Argentinian economy, Milei has maintained a high approval rating well above 50%. How has he done it? By being honest with the people, telling them there would be pain due to the treatment. But he has been able to deliver results. His claims about what his actions would produce have borne out so far.

The result, then, is that the social justice villain obsessed with Austrian economics has become more of a hero. Economic performance requires more than intent and rhetoric. Leadership requires results that are grounded in reality.