Javier Milei - Exciting Times in Argentina
A libertarian won the presidency in Argentina. So, what next?
About two weeks ago, on November 19th, Javier Milei won the Argentinian presidency with a wide margin of over 11 percent. This victory is particularly impressive given that Argentina has been led by centrist-left and far-left parties for about 40 years. For a libertarian to win after such a long history of leftist control tells us that Argentinians are not happy with the status quo. Argentinians want change and Milei is promising to supply it when he takes office on December 10th. But can he?
First, we need to understand what Milei says he will do. Despite what many ridiculous American media companies have maliciously insinuated, Milei is decidedly not far-right. The defining characteristic of the far-right is the propensity toward social control, like banning same-sex relationships, banning drug usage, banning prostitution, banning books, etc. Not only has Milei never publicly suggested any of these bans, but he has openly supported policies like drug and prostitution legalization. In fact, his vocal support of decreasing government size and control indicates that he decidedly does not want the government to be in the business of regulating Argentinians’ social lives. In almost every way, Milei embodies what Americans understand to be a libertarian: an advocate for free lives and free markets.
Given his libertarian outlook, there are two policies that he speaks about frequently: dollarizing Argentina and eliminating most of Argentina’s ministries. For both of these policies, he has one major obstacle. Despite Milei’s presidential victory, his party did not win a majority in the either chamber of Argentina’s bicameral congress. In both chambers, the plurality of seats was won by the leftist coalition that has controlled Argentina for most of the last 40 years. It would be difficult for Milei’s party to form a governing coalition, so Milei will most likely have to deal with a hostile congress. This means that we are not going to see an immediate libertarian transformation, but some change is still possible. Thanks to the last 40 years of leftist governance, the presidency has more power than it would in a better structured republic. Where possible, Milei should use this power to limit the size and control of the Argentinian government.
Putting the congressional issue aside, Milei’s primary policies have other obstacles. For instance, dollarizing Argentina will be complicated. Dollarization means replacing the Argentinian peso with the United States dollar. Milei cannot snap his fingers and have dollarization materialize overnight. Argentina does not have enough dollars in reserve to replace the peso at the going market rate (which is technically a black-market rate because Argentina’s current leftist government dictates an unnaturally low exchange rate). Given that Argentina does not have sufficient reserves, the first step to dollarization is to stabilize the peso, which has recently seen inflation rates around 140 percent. Meili should use his power to prevent Argentina’s central bank from printing excess pesos, like it has done in recent decades. The second step is to increase trade with the United States via trade agreements that eliminate quotas and lower tariffs. Increased trade will bring dollars into Argentina and improve the dollar-peso exchange rate. Once the peso’s value is steady, and dollar reserves are sufficiently high, Argentina can formally dollarize and dismantle their incompetent central bank.
Milei’s proposal to eliminate most of Argentina’s ministries should also be done with care. Milei’s proposal involves eliminating about 12 of Argentina’s 19 ministries, including the ministries of culture, tourism, and “social development” among others. These ministries are primarily involved in regulating Argentinians’ lives, so their removal will improve Argentina’s economy in the medium to long run. However, their elimination will cause a spike in unemployment in the short run, which could cause sufficient backlash that the changes are reversed by the next president. The goal should be to eliminate as many agencies as possible at once such that the backlash is insufficient to reverse the changes. Once unemployment eases, the next batch of agencies can be eliminated. Repeat the process until all 12 agencies are eliminated. Given Argentina’s propensity toward leftist politicians in the past, Milei should try eliminating two agencies at a time and wait about a year for unemployment to cool before eliminating two more, then repeat. It will be a delicate process, but it can be done.
It is important that Milei implement his policies in a reasonable and measured way so that the policies outlast his time in office. This would be immensely beneficial for Argentina, and possibly for the rest of the world too. Never before in modern history has a libertarian won the presidency of a country, so many eyes will be on him. Argentina is in a rough economic position today and if Milei and his supporters make a bad situation worse, it may hurt the libertarian image globally. But if he can turn the situation around, it would be a beautiful example for the rest of the world to emulate. ¡Mucha suerte a Milei!