Libertarianism is in fact combating the legend of Peronism which is very much alive, Richard Barton writes.
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We will put an end to the parasitic, stupid, useless political caste that is sinking this country.
Milei in a speech after finishing in first place in primary elections in August 2023
The long shadow of Juan Domingo Perón
To grasp the present-day social and economic situation of Argentina at which it arrived is impossible without at least some limited hints about the Peronist movement which have been staging comebacks since mid 20th century. Perón claimed that he had learned economics during his two-year stay in Italy. The key tenets of Perón’s economic ideas included emphasis on industrialization, trade and financial autarchy, and active state planning and intervention, particularly in the allocation of credit and the distribution of income among factors of production. These policies had a persistent and negative impact on the Argentine economy and led to inflation, deficit and stagnation.
Some analysts agree that the Peronist Economic Policy Paradigm is best condensed in a letter sent by Perón in 1952 to the newly elected president of Chile, Carlos Ibáñez del Campo:
Give the people, especially to the workers, all that is possible. When it seems to you that you have already given them too much, give them more. You will see the results. Everybody will try to frighten you with the spectre of an economic collapse. But all of this is a lie. There is nothing more elastic than the economy, which everyone fears so much because no one understands it.
Ironically, by the end of 1951, the Argentine economy was down on its knees after four years of stagflation and growing social unrest. It was evident by then that the economy was not “elastic.”
Some further insights into Perón’s peculiar way of thinking may be given on the basis of his speeches. According to analysts like Emilio Ocampo who is an expert on Peronism, they can be reduced to arguments in support of the nationalistically-tinged idea disregarding individual effort or luck but emphasizing the influence on income as an external force with human intention. Importantly, it is “others”, Perón went on to argue, who are actively taking actions which lower Argentinians’ income. He saw of minor importance the question of taking a collective stand to reduce the influence of natural elements (through insurance or a better selection of activities and crops). Basically, for him it was a question of actively opposing other actors that try to exploit Argentines.
The newly elected president Javier Milei took defeated Sergio Massa whose Peronist movement had governed for 16 of the last 20 years. He promises to overcome a financial calamity that has left 40% of Argentina’s 45 million citizens in poverty and pushed inflation to more than 140%. How does he intend to achieve it? Well, it is not a secret, he has already rolled out all the heavy libertarian weaponry.
Would you trade with an assassin?
President Javier Milei in November 2023
Crossroads
The striking feature of Milei’s recovery program is its ideological character. For starters, Milei presented his foreign policy proposals as a global “fight against socialists and statists.” He said he would not promote political and trade relations with communist countries like North Korea, China, Nicaragua, Venezuela, and Cuba.4 This may be interpreted as withdrawing or limiting interdependence and creating potentially conflictual relations basically on ideological grounds.
His harshest criticisms were reserved for China. According to him, President Xi Jinping’s ruling Communist Party typically silences dissidents with lengthy prison sentences and has been accused of detaining more than 1 million mostly Uyghurs in camps in its Xinjiang region. The U.S. has dubbed that campaign a genocide, while China calls the facilities vocational training centers.
China has also been accused of kidnapping a handful of people from abroad including Thailand. He reiterated that he would maintain particularly friendly relations with the U.S. and Israel.
The main thrust of his policies is aimed at radical transformation of Argentina’s economy. He is quite open about a need to introduce dollarisation and says his dollarisation detractors are “brutes”; Milei is determined to eliminate the Central Bank; He is committed to “chainsawing” 12 out of 18 ministries; he supports privatisation of 34 government-owned big enterprises; he foresees slashing government expenditure that climbed to 38% of annual GDP; he is committed to reduce or scrap most of Argentina’s taxes and once again declared: “I know how to exterminate the cancer of inflation!”
Mixed reactions to Milei’s victory
With such an extreme and unusual political programme as that of Milei, it galvanized into action as much his friends as his enemies. Let’s quote a few reactions to his win on 19 November 2023.
“I am a man of democracy, and I value nothing more than the popular verdict. I trust that tomorrow we can start working with Javier Milei to guarantee an orderly transition,” said outgoing President Alberto Fernandez.
“I congratulate Javier Milei for bravely representing the will to advance and prosper that lives in the hearts of Argentinians. He knew how to listen to the voice of young people and the fatigue of millions of neglected and impoverished people,” said former President Mauricio Macri.
“The extreme right has won in Argentina. It is the decision of its society. Sad for Latin America, and we’ll see… The relationship between Colombia and Argentina, the bonds between their communities are maintained in mutual respect. I congratulate Milei,” said Colombia’s President Gustavo Petro.
“As president of Chile, I will work tirelessly to keep our sister nations united and collaborating for the well-being of all,” said Chilean President Gabriel Boric.
“Democracy is the voice of the people, and it must always be respected… I wish the new government good luck and success,” said Brazilian President Luiz Ignacio Lula da Silva.
“Argentina is a close partner of the European Union. I thank Alberto Fernandez for the excellent cooperation over the last years. I look forward to continuing this cooperation for the benefit of our peoples,” wrote President of the European Council Charles Michel on X.
“We hope that the course towards commitment to multipolarity, independent foreign policy and a firm defence of national interests will be further developed. We are confident that this will be facilitated by Argentina’s accession to BRICS, which will open up new horizons and opportunities for it,” Russia’s ambassador to Argentina, Dimitry Feokitistov, said, according to Russian state news agency RIA Novosti.
Kremlin spokesperson Dimitry Peskov told reporters that the Kremlin had taken note of statements about Russia from Milei but wanted to maintain strong ties with Buenos Aires.
Washington’s reaction came via National Security Adviser Jake Sullivan, who congratulated the president-elect, as well as the people of Argentina “for holding free and fair elections.” “We look forward to building on our strong bilateral relationship based on our shared commitment to human rights, democratic values, and transparency,” he added
A spokesperson for China’s Ministry of Foreign Affairs said that Beijing hopes to “continue our friendship, boost our respective development and revitalisation with win-win cooperation.”
Former U.S. president Donald Trump, to whom Milei is often compared, also sent congratulations.
“Congratulations to Javier Milei on a great race for president of Argentina. The whole world was watching! I am very proud of you. You will turn your country around and truly Make Argentina Great Again!”
His victory was also celebrated by X’s owner Elon Musk, who posted: “Prosperity is ahead for Argentina.”
Modifications on the way
The electoral programme of president-elect Milei will have to be considerably modified. So widely acclaimed need for dollarisation is undergoing some scrutiny. Remarkably, Emilio Ocampo whom he made his chief dollarisation strategist raved about bringing offshore dollars and getting money from under mattresses and get them back into the system in order to create a pool of greenbacks for the purpose of dollarisation. Apart from that Milei’s team projecting dollarisation is looking at five alternatives among them such as treasury bonds, debt from the public pension fund and shares in the state oil firm.
While still being loud about his campaign promise, hailing dollarisation as a cure for the country’s hyperinflation problem Milei had on 5 October 2023 a disappointing meeting with the big business gathering in Mar del Plata. The leading Argentinian businesspeople refused to endorse his dollarisation proposal and remained sceptical about it. Furthermore, he was reminded that according to more than 200 economists of all stripes, signatories of an op-ed piece published on 10 September it is a “mirage.” In their text, they underlined the impossibility of “dollarising” without sufficient dollars in reserves, but also the loss of monetary sovereignty. To make the picture fuller, the IMF barred Argentina from accessing international markets while the country is still paying back its debts. Argentina owes the Washington, DC-based lender some $44 billion following a historic bailout in 2018. To make matters considerably worse, the World Bank expects the Argentine economy to contract by 2.5% in 2023, in part due to a devastating drought estimated to cost it $20 billion in lost agricultural exports. Presidente Milei, ain’t you unlucky!
One of the useful explanations as to why Argentina shouldn’t use dollarisation to control its inflation that I came across was that of researcher Bhagwan Das. The basic consequence of dollarisation is that Argentinian Central Bank ceases to exist and acts upon the instructions of the U.S. Federal Reserve. The latter institution acts in the interests of the U.S. Thus, the Argentinian Central Bank no longer acts as the lender of the last resort for domestic financial institutions in distress and gives up its power to set domestic interest rates and manage the exchange value of its currency.
How can it affect the Argentinian economy? For instance, right now, lending rates in the United States are at their maximum (5.25 to 5.50%) while its inflation is slowing to around 4% or even below. Once U.S. inflation rate declines to 2%, the U.S. Federal Reserve may start cutting its lending rate to support its own economic growth. Meanwhile, once Argentina adopted U.S. dollar as its own currency or legal tender, then with the prevailing budget and trade deficits and inflation rates, a reduction in interest rates will only worsen the inflation and drive the economy deeper into recession and unemployment. This in turn, may lead to social unrest and riots as happened in the early 2000s.
In this context it is no longer surprising that in his victory speech Milei no longer mentioned dollarisation and shutting down the Argentinian Central Bank. It may be understood as a way of seeking support from centrist parties.
I had watched for many years and seen how a few rich families held much of Argentina’s wealth and power in their hands. So Perón and the government brought in an eight-hour working day, sickness pay and fair wages to give poor workers a fair go.
Evita Perón
The most essential reasons for abandoning dollarisation and closing down the central bank
These electoral campaign promises of president Milei may not be politically acceptable. Ex-president Sergio Fernandez was courteous enough to congratulate Javier Milei on his victory but at heart he remains a Peronist and has no intention to facilitate his libertarian policies. Most importantly, he commands considerable influence in Argentinian congress, trade unions and in Argentinian society.
In 1976, 1989, in the 1990s, and 2007, while in Argentina I had extensive conversations with ordinary people trying to learn about their perceptions of Peronism. Overwhelmingly, they were positive. Some workers in a random conversation noted: “Ordinary people had a chance to buy a house only when Perón was in power.” When I insisted on something wrong that was going in the Perón era one worker told me that Perón introduced in his factory rules according to which once a worker performed well for half a year you couldn’t sack him even when he performed poorly later on.
Libertarianism is in fact combating the legend of Peronism which is very much alive. Perón, his wife Evita are part of the Argentinian folklore, culture and traditions admired by many. I can’t imagine most of Argentinians wanting the dollar as their legal tender or being happy with their monetary policy run from Washington. I fully subscribe to the recent comment made by William Jackson, chief emerging markets economist at Capital Economics who said: “We suspect that some of his more radical proposals — namely dollarization — may not materialize, given limited support both in Congress and among the public.”
More flexibility in relations with foreigners and with his Argentinian colleagues is strongly recommended
Perhaps some flexibility is required in Milei’s “chainsawing” public spending (shock therapy). All that at this stage is known is not “shock therapy’” content but Milei’s plan to pass it to Congress on 11 December 2023.
It is necessary to refocus on Milei’s cutting ties or freezing them with China. To cut ties or freeze them seem strongly-worded statements leaving no doubts as to Milei’s intentions. But with all his determination to fight “communists and socialists” will he get his foreign policy and trade his way?
Can he ignore the fact that China is the second-biggest buyer of Argentine exports? Has he forgotten that in 2015 the then-Argentinian President Cristina Fernández de Kirchner while she was on a state visit to China sought new investments from the Middle Kingdom? After all, the present huge Chinese investments include a contract to build twin dams in Patagonia and an agreement to set up a nuclear plant. Is Milei unaware that it is no-one else but China that provides a crucial $18 billion swap line with the central bank that’s being used to pay the International Monetary Fund.
Lately, he has softened his comments on commercial ties with China. The word “freeze” was replaced by “not promoting,” and “honouring the already signed contracts.” Further contracts, it turns out, would be up to the Argentinian businesspeople and their Chinese counterparts. Amazingly enough, using high diplomatic skills, Chinese largely ignored Milei’s criticisms. At the same time, Chinese Foreign Ministry spokesman Wang Wenbin said at a press briefing in Beijing that if Milei visited China in person “he would have a completely different conclusion as to the freedom and security in China.”
Milei, el loco (the madman) as some call him among the Argentinian masses, displayed a far reaching bravado toward other politicians and personalities in Argentina. For instance, in previous interviews he has called the centrist mayor of Buenos Aires “a leftist piece of shit” and suggested that a former cabinet chief of a centre-right government should be beheaded with a samurai sword. In another instance, he charged the pope (who is Argentinian) with encouraging communism and dubbed climate change “a socialist lie.” On a lighter note, he neither denies nor confirms rumours that his dogs advise him. “If so,” he says, “they are the best political analysts in the world.”
First year under president Milei
I am among those who want to give the new Argentinian president a benefit of a doubt and I shall assume that Milei learns quickly and turns further towards moderation. If so, there will be no need to run the country neither by decrees nor to conduct referenda. The whole dramatic picture of Argentina’s crisis he called “tragic reality” seems to be blown out of proportions. To realise it, it may be worth comparing it with the crisis of 1989 when president Carlos Menem came to power. Most briefly, it was a poverty-stricken country with its inflation approaching 5000% (it is not a misprint), foreign debt was about $60 billion and domestic debt about $7 billion. In addition to that, there were power failures, factory closings, widespread layoffs and shortages of everything.
When I arrived in Buenos Aires in August 1989, I recall vividly seeing people carrying packets, briefcases or bags with piles of banknotes to purchase basic foodstuffs whose prices changed up to 2-3 times a day. Unintentionally, I envisaged myself a crisis in the Weimar Republic about which I had read a lot.
Well, frankly speaking, there is nothing like that in Argentina now at least in terms of inflation. Menem came up to power as a Peronist but astute observers say, he turned out to handle economic problems as a neoliberal democrat. The facts are that by 1993, under Menem inflation was down to single digits.
I can’t see Javier Milei not to reduce inflation markedly in the first year in power. There should be substantial rise in investment, employment and regular debt repayments.
And there seem to be some reasons for optimism for presidente Milei.
He had a “very comfortable” meeting with Biden aides: Jake Sullivan, national security adviser, and Juan Gonzalez, Latin America adviser. They not only will guide him, give him professional advice but he will have to follow their instructions. Support from the Biden administration will be essential. In the coming weeks, Milei will enter negotiations over Argentina’s troubled $43bn loan from the IMF, in which the U.S. is the biggest stakeholder. They won’t let him down – he will be given every possible assistance they can offer to him. After all, they won’t find another loud-mouth of his calibre who would lecture the world about the virtues of the U.S. democracy.
