The trajectory of Javier Milei’s presidency in Argentina, six months in, remains uncertain. While there is hope in the economic and financial sectors, concrete results are yet to be seen.
By Karl-Heinz Paqué Deputy President of the Liberal International
Politicians must be judged by their actions, which distinguishes them from intellectuals in universities and publishing houses, whose opinions, theories, and predictions ultimately determine their standing. For Argentina’s president, this principle is especially pertinent. Milei’s ideas often seem perplexing, a curious mix of economically libertarian beliefs and socially conservative to reactionary positions. He advocates for a state that minimally intervenes in the economy, going so far as to propose dissolving the central bank and eliminating any control over private market power. His ideal is not the lean state of liberalism, which enables core functions like security, education, monetary stability, and economic growth, but a true minimal state – with private gun ownership, a ban on abortion, and disregard for climate protection. Undoubtedly, Milei aligns his libertarianism with right-wing populism, as evidenced by his connections to Spain’s Vox party and Donald Trump.
Elected president by a clear majority with this unorthodox worldview, Milei now faces the challenge of delivering practical results. The harsh reality of Argentina’s situation highlights the president’s necessary tasks, primarily radical financial and economic policy reforms. He must steer the country away from rampant inflation towards sustainable growth. Argentina needs to reintegrate fully into the global division of labor with open markets, a stable currency, no protectionism, and unrestricted capital flows. This requires a profound renewal of the state, market order, and the central bank, but not their complete dismantlement.
Much suggests that the anarcho-capitalist dreamer has grasped these challenges and constraints. In his initial months, he has moved Argentina closer to a balanced budget, mainly by not offsetting galloping inflation with wage increases for public servants, allowing significant “cold progression” to reduce real incomes. Argentinians term this the “mixer.” Additionally, there have been mass layoffs in the public sector, particularly of temporary workers. These measures are “low-hanging fruits,” quickly harvested but only sustainable if the state deficit permanently disappears, ensuring future state financing is no longer dependent on printing money, stripping an independent central bank of its financial policy foundation. Only then can the peso be stabilized.
Success in these endeavors hinges on quickly halting the current economic decline and returning to growth. This needs comprehensive market deregulation, privatization of public enterprises in strategic sectors like energy, and openness to foreign capital. Milei has indeed taken significant steps in this direction, with a legislative package passed in a reduced form through the country’s House of Representatives and Senate. This is notable given that his party, La Libertad Avanza (“Freedom Advances”), lacks a majority, yet he managed to garner support from centrist lawmakers and moderate Peronists in the opposition. This democratic process is reminiscent of the successful currency and price stabilization by the liberal Gustav Stresemann in the Weimar Republic in 1923/24. The legislative package grants the government comprehensive but temporary special powers, including long-term tax breaks for foreign direct investment, potentially making Argentina an attractive destination once again. The hope is that this will also encourage the return of an estimated $300 billion in private wealth parked abroad during the Peronist era.
However, Javier Milei is still far from achieving such political fortune. The central question is whether he can sustain his program of market-based stabilization despite potential protests and show early successes with price and currency stability and robust economic growth. It is also crucial that the country’s main creditors are convinced of the new course. Currently, the chances appear promising; both the International Monetary Fund and China seem willing to extend credit terms.
Milei is making political headway. His popularity has not significantly suffered despite the drastic reduction in real incomes due to the “mixer” and public sector layoffs. Argentinians seem willing to endure hardship if it means ridding themselves of hyperinflation and restoring the economy’s international competitiveness, promising sustainable employment and higher wages compared to the inflated domestic sector. This presents a historic opportunity for radical reforms.
Yet, with a sober perspective, it becomes evident that Milei’s agenda, though massive, is a conventional austerity and growth program, diverging from his initial anarcho-capitalist fantasies. This includes his initial aim of complete “dollarization” of the Argentine economy, which is unnecessary if the peso stabilization succeeds. Achieving this is challenging enough, and a further strict liquidity constraint to the dollar alone could exacerbate the recession. It is sufficient for a stable peso and the dollar to be used in parallel in Argentina – direction Milei’s advisors, including the finance minister, seem to be considering, marking another step forward.
Despite these visible advances, it remains concerning that Milei continues to engage in media-provocative actions abroad, damaging goodwill. Notable was his rockstar-like appearance in Spain at a Vox rally, where he accused the wife of Prime Minister Sanchez of corruption to the crowd’s cheers. Similarly, his disparaging comments about Brazilian President Lula, whose cooperation he needs for the desired EU-Mercosur agreement, showed poor diplomacy. Daily media reports highlight more diplomatic missteps by Milei, which unnecessarily tarnish the image of a president firmly anchored in Western foreign policy, supporting Ukraine against Russian aggression and Israel against terrorism from Hamas and Hezbollah.
In summary, Javier Milei remains an enigma. From a liberal perspective, it is hoped he focuses strictly on stabilizing his country, a priority after decades of economic decline. He should quickly abandon the anarcho-capitalist and right-wing populist elements of his agenda. This is not the time in Argentina for state abolition, nor for a conservative cultural battle or a right-wing populist divide.