Argentina has provided the prime example of counterproductive policy for most of the past century. At the beginning of the twentieth century, it was one of the wealthiest countries in the world; now it is one of the poorest. More taxation, regulation, and inflation than most other countries experienced have eaten up a large part of the capital that was generated during the era of Argentine capitalism of yore. Though the administration that ruled before the present was indeed inclined toward the Right, its era ended in disappointment, as the necessary market reforms were not achieved because the coalition included socialist groups.
Out of this situation emerges Javier Milei. Born in 1970, he decided he wanted to be an economist at twelve as he experienced hyperinflation. Around 2014, he became an Austrian almost overnight after reading Murray Rothbard’s monograph on monopoly theory, which prompted him to read everything that he could get his hands on by Rothbard, Ludwig von Mises, and other Austrians. From 2014 to 2021 Milei appeared regularly on television as an economist defending libertarian ideas, at a time when calling someone libertarian was seen as an insult in Argentina.
In the 2021 elections, his group became the third strongest in the country and obtained four of the 257 seats in the Chamber of Deputies in its first showing. Milei is now a member of the Congress of Argentina and is openly campaigning for the presidential election that will take place in 2023. His exponential rise in popularity has prompted Milei and his opponents to take the possibility of his victory very seriously. He wants to cut down the number of ministries from twenty to eight, of which he already has four working as shadow ministries: economy, foreign relations, welfare, and infrastructure.
In his youth, Milei was a semiprofessional soccer player and a rock band member. His supporters treat him like a star, and many have become as passionate as he is about the moral case against the state. Young people are his core supporters. Even middle schoolers all throughout Argentina are now reciting the nonaggression principle. His support progressively growing as youths infect their parents and grandparents with the ideas of liberty.
Milei is currently the leading presidential candidate. A recent survey by the University of San Andrés shows that in scenarios with named candidates, Milei is the only one with more than 20 percent of the vote for the first voting round. If no one wins more than 50 percent of the votes, this scenario would result in a second voting round between the top two candidates. The consensus is now that if Milei were to appear in a second round, he would win it because the other two main coalitions’ supporters are less opposed to Milei than they are to each other.
Milei is being very transparent about his reform plan, which appears to be very prudent and can expect to obtain broad support. It’s a convergence process that would have Argentina catching up to the US in terms of gross domestic product per capita in a period of thirty-five years, with two-thirds of the growth happening in the first third of the period. The plan is structured in three generations of reforms that are to be deployed in a specific sequence.
The first generation includes a fiscal, labor, trade, and monetary reforms. The fiscal reform will result in strong reduction in public spending, taxation, and tax varieties. The labor reform will increase flexibility for future employment contracts, making it easier to hire and fire employees. The trade reform will establish unilateral free trade, with no tariffs, quotas, nor import-export restrictions.
The monetary reform will take the financial system from fractional reserves to a clear separation between demand deposits, which will have to be on full reserve, and investment banking, which will include time deposits and other products, effectively making the system immune to bank runs. It will also eliminate regulations and increase competition. The central bank will be liquidated, and the Argentinian peso will cease to exist. It will become legal to make transactions and denominate contracts in the money of anyone’s choosing.
The second generation of Milei’s plan includes pension and welfare reforms. The pension reform will privatize pensions and will allow federal employees to retire early to increase employment in the private sector. The welfare reform will restructure welfare to incentivize employment. The plan’s third generation includes healthcare and education reforms. The healthcare reform will push for increasing privatization of the healthcare system and eliminating regulations. The education reform will grant freedom to every school to adopt its own curriculum and will transform establish a voucher system for educational spending to incentivize school competition.
We are still over a year away from the election. Conditions and trends are subject to change. Nevertheless, if the current trend continues, Argentina is in for some big changes in the right direction. It’s always impossible to predict how someone will govern after being elected, but after a century of ruinous statist policies, one can hope that a Milei administration will begin to undo Argentina’s disastrous past.
