POLITIQ

Argentinian economy has for decades been characterised by dire instability in almost every indicator. This is when Javier Milei, a relatively unknown television pundit, came in and promised to deliver on his vision of the anarcho-capitalist state. So far his ‘shock therapy’ has worked.

It is crucial to understand just how much of a mess Milei has inherited. The previous Peronist government left him a country in a disastrous economic and financial state. In 2023, Argentina had the highest inflation rate in the world at around 211%. This had been leading to uncontrolled prices all throughout the country, with the Argentinian supermarkets marking price increases almost daily.

Therefore, upon his election, Milei was dealt a near impossible job of stabilizing the economy. His campaign promised to establish his approach on two pillars: fiscal reform and market stabilisation.

It is important to note, though, that these professional-sounding suggestions were accompanied by Milei’s uncanny personal character and a variety of populist stunts. For instance, he frequently used a chainsaw as his ‘weapon of choice’ to symbolise his commitment to cut the government’s budget and reduce the state’s involvement in the economy.

Unlike many other politicians, his boldness on the campaign trail has also transformed into his approach to governance. One of the first things he did upon taking office was to cut half the number of ministers and eliminate 70.000 public sector jobs.

But his policy approach has been much more complicated and nuanced, of course. In basic terms, Milei believed that Argentina has both excessive consumption and government spending domestically, which led the state to ultimately borrow too much. Additionally, the country for a long time had been importing much more than it exports, which led to consistent fiscal deficits.

To combat this, Milei has immediately cut the government spending and made a decision to devalue the national currency Peso by 50%. This meant that Argentinians could not buy as many imported goods as they have before, while the country’s exports became more competitive.

While these bold reforms were accompanied by a significant recession at first, after just a couple of months the country’s economy started to make a ‘V-shape’ recovery. On a month-by-month basis, inflation now stands around 3% which is extremely low by Argentinian standards. More importantly, it is higher than the average wage growth, which is increasing by about 6%. And perhaps the most significant achievement of Milei's tenure has been the turnaround of the fiscal deficit. By October 2024 Argentina ran a $12.3 billion dollar fiscal surplus, compared to the $5.2 billion deficit the same time last year.

That is not to say that the economic situation in Argentina is without problems. Though the poverty rate, which was sparked by Milei’s capitalist reforms is decreasing and now stands at about 49%, it is still very high.

However, Milei seems defiant that these problems are only short-term and the long-term future for Argentina is bright. His capitalist right-wing economic reforms have so far delivered an almost unthinkable - pulled Argentina out of its decade-long economic crisis. Despite many people seeing him simply as a populist stuntman - which he frankly is, at least to an extent - it is important to acknowledge the level of technocratic work that has been put in his economic policy.

It now seems that a forgotten ‘Washington Consensus’ is reviving. The 2008 financial crisis has undoubtedly placed a great strain on the free market policies. However, Milei’s example of adopting a very extreme capitalist vision to such a successful extent may start to turn the trend backwards.

A great majority of Argentines seem to share the optimism that Millei has been projecting. His most recent approval ratings have been staying around the 50% mark and do not show any sign of a potential fall.