The specifics of Argentina gave Milei his opening. But this is just one of a number of political earthquakes of the last few years.
Interpreting in a global context is as important now as for the events in a number of countries in 1848, 1968, or 1989-1991. We are at one of those hinge-points in history.
The common thread is that the national "expert" and "elite" classes have been discredited the world over. Milei is showing a libertarian response. Others are offering more nationalist and authoritarian responses.
I hope Milei succeeds and inspires imitation, because some of the other possibilities are darker. The only certainty is that status quo structures are going to be destroyed and replaced in a major way.
Not having support in the legislature for truly radical libertarian measures is a problem, but it should be kept in mind that metastasizing interventionist/welfarist hellscapes rely a great deal on discretionary powers over rule-making being delegated from legislatures to executive branch bureaucrats. Even if the legislature is totally uncooperative, unilaterally slashing the bureaucracy and exercising Presidential discretion in the direction of junking the rules can do a lot to free up an economy.
Likewise, one shouldn't underestimate the power of a radical libertarian ideology that has fired the imaginations of young people who now realize that they have no future in becoming compliant minions or tame clients of the state's ruling class. Even if that doesn't translate into more legislative seats for La Libertad Avanza (welfarist/bureaucratic patronage and special interest privilege-mongering naturally being perennial enemies of pro-liberty political movements in traditional democratic contexts), it does mean going forward that many Argentinians are now much more inclined to ignore or even openly defy orders coming from statist control freaks. Recall the shining examples of how the former socialist regimes in Eastern Europe peacefully fell almost without a shot being fired (apart from the Romanian dictator being dispatched with extreme prejudice after his security services killed some demonstrators)--once a people are fed up with a regime ready to reclaim their liberty, there is little the statists can do to keep the people from tearing down the walls that imprison them.
Regarding the last sentence, I'd nitpick that there are many examples of state powers holding up even though people were really really fed up and ready for freedom. Take Iran last year, peasant rebellions through the feudal times, some Soviet rebellions that were successfully crushed.
Yes, but once the executive branch has become paralyzed (because either the leader stops giving orders to coerce dissenters, or the troops stop following such orders), crushing an aroused populace is no longer an option. The rest of the ruling class can't save the system.
As President Milei said at the start of his campaign, "I did not come here to guide lambs, I came here to awaken lions!" In this interview he gave a passionate explanation of what lies behind that stirring line, using the metaphor that the awakening of the people has the dynamics of an exponential function reaching a turning point that the politicians and privileged beneficiaries of the state won't be able to stop:
Just to add: Don't discount the peer effects. Were other countries to see the positive effects of Milei's bold reforms and push in that direction, Argentina might not be the only beneficiary of his free-market policies.
Russia was in a very different situation of one-party rule collapsing into gangsterism. The earliest usage of the term "shock therapy" was actually in South American countries with hyperinflation, and it worked out there.
Decent puff piece for the masses but I would have left out the word libertarian as I think that instantly dooms any chance at publication. Besides I've seen no evidence he's a libertarian at all, just a free marketeer and while sure no true Scotsman, when he fails, as he will, libertarianism will get the blame for generations to come with worldwide detractors using it as an example hence why associate him with something he's not to it's detriment.
I'm not going to get into a stupid argument about "not a real libertarian!" but even on your terms if you were 100% correct your criticism still doesn't make sense. Why would labeling him a "free marketeer" instead of "libertarian" be any better if you think it's just going to result in "blame for generations" by "worldwide detectors"? Why would the free market taking the blame be better than libertarianism. Makes no sense.
Because support of free markets are lip service supported by many other mainstream ideologies as well hence it doesn't hurt libertarianism by being besmirched when he fails as a free marketeer. Free markets have nothing to do with libertarianism, it's just a positive secondary affect of it so why undermine your marketing by tying yourself to a known upcoming failure. Even if he succeeds though, it will have nothing to do with libertarian policies hence once again, why champion him.
Optimism: During Milei’s term in office regulations will not get worse. Entrepreneurs can work around lots bad rules as long as they see stability for the future.
Pessimism: Four years is not enough time to establish a business without fear that the next administration will take it away.
"In 1910, the average American was only 25% richer than the average Argentine.[i] Now it’s about 400%."
I think it's a bad idea to expect Argentina to go back in time and achieve anything close to that 75% (*). The causes for Argentina's previous wealth are no longer there:
Milei won against opponents already among the most liberal (the actual sense of the world, as I am frustrated to have to stress to Americans) candidates in Argentine history, including Peronist Massa. His radicalism was so tangible that even some serious news sources, with no apparent irony, compared him to Trump, whose policy stances are exactly the opposite in any way I can think of and who stands out because of his absolute lack of understanding of economics, whereas Milei is one of the very few who understands it in Latin American history.
What else does Argentina need less than even more of the radicalism that has haunted it for all of its existence?
Then I realised Argentina has already tried reasonable gradualist liberalism twice in three decades. The first created an unprecedented disaster, the second achieved almost nothing (Macri not to be confused with Macron). So perhaps only a rabble rouser had a chance of getting anything done.
Then I looked at what he is actually doing. Devaluing the desastrous official exchange rate stopped short of the radicalism that would cause chaos. His afuera theater started with the cases so egregiously corrupt and regressive that no sane person could oppose it save from the few dozen people making huge rents. He picked the areas where the benefits would be quick and tangible, such as much lower air fares and internet connection prices. And he doubled social spending on the poor using the savings. He courted investors for whom otherwise the risks of investing in anything creating employment would be untenable for years to come. He even stepped back from the insanity of his peremptory rejection of any links to China and Brazil.
And the most cringeworthy part of his radicalism, his reactionary social conservatism is nowhere to be seen.
In fact he is only doing what Bullrich would have done anyway had she prevailed, and now has secured the support of the whole right wing and even parts of the poor electorate which a year ago found anything but Peronist fascism (though they switched the label to socialism). He might even actually manage to win over parliament.
Was his rabble rousing just a political game? If so, that was an Oscar worthy performance. Even so keeping it up throughout years of inevitable harm until anything truly valuable becomes close to bankable and more years for those effects to take root, will require more than that. Hard to imagine, but actually imaginable…
For any Italian or Spanish speakers, I recommend the Youtube conversation out yesterday among Michele Boldrin (Washington University, St Louis), Pablo Guidotti and Andy Neumeyer (both from Torcuato Di Tella University, Buenos Aires).
> To stop inflation, you must stop printing money and fix the budget at the same time.
Mises says that price rises from inflating "money" is less destructive than the resulting shift from market-directed production to politics-directed production. Does anyone know about this?
Sorry David. It's not a nice piece because Bryan doesn't know the details of my home country's history since at least 1928. I cannot explain here what happened since then but the most relevant period to understand what may happen to Milei is 1989-99, that is, the presidency of Carlos Menem (from July 9, 1989 to December 10, 1999). Menem was a Peronist from a very small, poor province but ready to be the party's candidate in the 1989 election (I know all the details because President Alfonsín asked the U.S. President to prevent Menem to become president with a huge loan from the IMF and WB in July 1988 and the loan was denied). Menem had an absolute majority in Congress. You should divide his presidency into two economic periods: until March 1, 1991, and thereafter. In the first period, he acted like an old Peronist but the collapse of the economy in early 1991 led him to appoint my old friend Domingo Cavallo as Minister to implement the Convertibility Plan which included also a reduction in public expenditure and some liberalization of the economy (as well as some debt relief under the Bradley plan). The Plan was a success but over time it was abandoned by Menem to extend his presidency to 12 years (he was president for 10 years thanks to the constitutional reform of 1994 which allowed two successive periods of 4 years rather than one six-year period but he was able to complete a 6-year period and one 4-year period). By the time Menem left office in late 1999, the Convertibility Plan was not effective and the dismissal of convertibility was widely expected but it outlived for another two years, leading to another terrible crisis. The night Cavallo resigned in August 1996, I was having dinner with a friend who had been offered the position, but he rejected. The main point of our conversation was the impossibility of doing anything to meet Menem's desire to remain until December 2003 other than to ruin the economy (btw, in 2003, Menem won the first-round election but he opted out of the second-round because he knew his Party was going to support Nestor Kirchner).
So what can Milei negotiate with the current Congress in the next two years? And with the current Judiciary (yes, lawfare has dominated Argentina's complex judiciary for a long time)? It has been a huge surprise for Milei to become president, so let us hope he can get at least 50% of what he has already announced (it'd be much more than anything Menem did after March 1991).
Sorry, David. I didn't say Bryan made mistakes. I'm saying he is missing details of relevant past experiences --the ones that Gordon Tullock used to pay attention when trying to understand what happened and what may happen. Those details are related to how politicians had attempted to get and keep power, and indeed their strategies are expected to take into account the field in which they are playing. Since I cannot tell you all the experiences of the past 100 years, I selected the one that could be most relevant today.
In addition, since I have been very familiar with Chile history over the past 51 years, I can tell you that what happened during Pinochet is irrelevant to what may happen to Milei (btw, a few days ago the Pinochet's Minister responsible for designing and implementing the fiscal reform of 1975 that facilitated all the other reforms passed away, and it was an opportunity to share ideas about that reform with a couple of old friends and how different that experience was from what is going on in Argentina).
The specifics of Argentina gave Milei his opening. But this is just one of a number of political earthquakes of the last few years.
Interpreting in a global context is as important now as for the events in a number of countries in 1848, 1968, or 1989-1991. We are at one of those hinge-points in history.
The common thread is that the national "expert" and "elite" classes have been discredited the world over. Milei is showing a libertarian response. Others are offering more nationalist and authoritarian responses.
I hope Milei succeeds and inspires imitation, because some of the other possibilities are darker. The only certainty is that status quo structures are going to be destroyed and replaced in a major way.
Not having support in the legislature for truly radical libertarian measures is a problem, but it should be kept in mind that metastasizing interventionist/welfarist hellscapes rely a great deal on discretionary powers over rule-making being delegated from legislatures to executive branch bureaucrats. Even if the legislature is totally uncooperative, unilaterally slashing the bureaucracy and exercising Presidential discretion in the direction of junking the rules can do a lot to free up an economy.
Likewise, one shouldn't underestimate the power of a radical libertarian ideology that has fired the imaginations of young people who now realize that they have no future in becoming compliant minions or tame clients of the state's ruling class. Even if that doesn't translate into more legislative seats for La Libertad Avanza (welfarist/bureaucratic patronage and special interest privilege-mongering naturally being perennial enemies of pro-liberty political movements in traditional democratic contexts), it does mean going forward that many Argentinians are now much more inclined to ignore or even openly defy orders coming from statist control freaks. Recall the shining examples of how the former socialist regimes in Eastern Europe peacefully fell almost without a shot being fired (apart from the Romanian dictator being dispatched with extreme prejudice after his security services killed some demonstrators)--once a people are fed up with a regime ready to reclaim their liberty, there is little the statists can do to keep the people from tearing down the walls that imprison them.
Regarding the last sentence, I'd nitpick that there are many examples of state powers holding up even though people were really really fed up and ready for freedom. Take Iran last year, peasant rebellions through the feudal times, some Soviet rebellions that were successfully crushed.
Yes, but once the executive branch has become paralyzed (because either the leader stops giving orders to coerce dissenters, or the troops stop following such orders), crushing an aroused populace is no longer an option. The rest of the ruling class can't save the system.
As President Milei said at the start of his campaign, "I did not come here to guide lambs, I came here to awaken lions!" In this interview he gave a passionate explanation of what lies behind that stirring line, using the metaphor that the awakening of the people has the dynamics of an exponential function reaching a turning point that the politicians and privileged beneficiaries of the state won't be able to stop:
https://www.youtube.com/watch?v=Ar4N99qfubE
Just to add: Don't discount the peer effects. Were other countries to see the positive effects of Milei's bold reforms and push in that direction, Argentina might not be the only beneficiary of his free-market policies.
See this piece I wrote last week: https://www.ourlongwalk.com/p/in-search-of-south-africas-javier
I like Milei and I hope he success, but I’ve learned to never underestimate the propensity of South American countries to underwhelm and underperform.
Just when you think things may finally be turning around - populists, socialists, and kleptocrats will come out of the woodwork to spoil it all again.
How can Argentina avoid the problems that occurred with the “shock therapy” in the former Soviet bloc?
Argentina has a capitalistic economy. Badly wounded by governments, but it's still there, and it can recover if it gets abused less.
The Soviet bloc had centrally controlled plan economies. That's a whole other animal. It won't become a capitalistic economy if you stop planning.
Russia was in a very different situation of one-party rule collapsing into gangsterism. The earliest usage of the term "shock therapy" was actually in South American countries with hyperinflation, and it worked out there.
So can the government regulate the privatization it seeks? What occurred in Russia was greed and seems perfectly capable of happening elsewhere.
The regulation you need are rule of law including (but not limited to) respect for property an contracts. The Russian state tried to develop that.
Argentina might.
Decent puff piece for the masses but I would have left out the word libertarian as I think that instantly dooms any chance at publication. Besides I've seen no evidence he's a libertarian at all, just a free marketeer and while sure no true Scotsman, when he fails, as he will, libertarianism will get the blame for generations to come with worldwide detractors using it as an example hence why associate him with something he's not to it's detriment.
I'm not going to get into a stupid argument about "not a real libertarian!" but even on your terms if you were 100% correct your criticism still doesn't make sense. Why would labeling him a "free marketeer" instead of "libertarian" be any better if you think it's just going to result in "blame for generations" by "worldwide detectors"? Why would the free market taking the blame be better than libertarianism. Makes no sense.
Because support of free markets are lip service supported by many other mainstream ideologies as well hence it doesn't hurt libertarianism by being besmirched when he fails as a free marketeer. Free markets have nothing to do with libertarianism, it's just a positive secondary affect of it so why undermine your marketing by tying yourself to a known upcoming failure. Even if he succeeds though, it will have nothing to do with libertarian policies hence once again, why champion him.
Optimism: During Milei’s term in office regulations will not get worse. Entrepreneurs can work around lots bad rules as long as they see stability for the future.
Pessimism: Four years is not enough time to establish a business without fear that the next administration will take it away.
"In 1910, the average American was only 25% richer than the average Argentine.[i] Now it’s about 400%."
I think it's a bad idea to expect Argentina to go back in time and achieve anything close to that 75% (*). The causes for Argentina's previous wealth are no longer there:
https://www.mangosorbananas.com/p/why-argentina-is-not-rich
https://www.mangosorbananas.com/p/why-argentina-is-not-rich-not-enough
(*) And it was more like 62%, not 75%.
"The New York Times invited me to write this op-ed on Milei’s Argentina, but decided to go in another direction"
They went with a late stage candidate.
Milei won against opponents already among the most liberal (the actual sense of the world, as I am frustrated to have to stress to Americans) candidates in Argentine history, including Peronist Massa. His radicalism was so tangible that even some serious news sources, with no apparent irony, compared him to Trump, whose policy stances are exactly the opposite in any way I can think of and who stands out because of his absolute lack of understanding of economics, whereas Milei is one of the very few who understands it in Latin American history.
What else does Argentina need less than even more of the radicalism that has haunted it for all of its existence?
Then I realised Argentina has already tried reasonable gradualist liberalism twice in three decades. The first created an unprecedented disaster, the second achieved almost nothing (Macri not to be confused with Macron). So perhaps only a rabble rouser had a chance of getting anything done.
Then I looked at what he is actually doing. Devaluing the desastrous official exchange rate stopped short of the radicalism that would cause chaos. His afuera theater started with the cases so egregiously corrupt and regressive that no sane person could oppose it save from the few dozen people making huge rents. He picked the areas where the benefits would be quick and tangible, such as much lower air fares and internet connection prices. And he doubled social spending on the poor using the savings. He courted investors for whom otherwise the risks of investing in anything creating employment would be untenable for years to come. He even stepped back from the insanity of his peremptory rejection of any links to China and Brazil.
And the most cringeworthy part of his radicalism, his reactionary social conservatism is nowhere to be seen.
In fact he is only doing what Bullrich would have done anyway had she prevailed, and now has secured the support of the whole right wing and even parts of the poor electorate which a year ago found anything but Peronist fascism (though they switched the label to socialism). He might even actually manage to win over parliament.
Was his rabble rousing just a political game? If so, that was an Oscar worthy performance. Even so keeping it up throughout years of inevitable harm until anything truly valuable becomes close to bankable and more years for those effects to take root, will require more than that. Hard to imagine, but actually imaginable…
For any Italian or Spanish speakers, I recommend the Youtube conversation out yesterday among Michele Boldrin (Washington University, St Louis), Pablo Guidotti and Andy Neumeyer (both from Torcuato Di Tella University, Buenos Aires).
The links to the endnotes don't seem to work.
> To stop inflation, you must stop printing money and fix the budget at the same time.
Mises says that price rises from inflating "money" is less destructive than the resulting shift from market-directed production to politics-directed production. Does anyone know about this?
Argentina is a country with rich natural resources and a lot of human capital, what is the optimistic scenario where Milei makes progress?
Nice piece.
Sorry David. It's not a nice piece because Bryan doesn't know the details of my home country's history since at least 1928. I cannot explain here what happened since then but the most relevant period to understand what may happen to Milei is 1989-99, that is, the presidency of Carlos Menem (from July 9, 1989 to December 10, 1999). Menem was a Peronist from a very small, poor province but ready to be the party's candidate in the 1989 election (I know all the details because President Alfonsín asked the U.S. President to prevent Menem to become president with a huge loan from the IMF and WB in July 1988 and the loan was denied). Menem had an absolute majority in Congress. You should divide his presidency into two economic periods: until March 1, 1991, and thereafter. In the first period, he acted like an old Peronist but the collapse of the economy in early 1991 led him to appoint my old friend Domingo Cavallo as Minister to implement the Convertibility Plan which included also a reduction in public expenditure and some liberalization of the economy (as well as some debt relief under the Bradley plan). The Plan was a success but over time it was abandoned by Menem to extend his presidency to 12 years (he was president for 10 years thanks to the constitutional reform of 1994 which allowed two successive periods of 4 years rather than one six-year period but he was able to complete a 6-year period and one 4-year period). By the time Menem left office in late 1999, the Convertibility Plan was not effective and the dismissal of convertibility was widely expected but it outlived for another two years, leading to another terrible crisis. The night Cavallo resigned in August 1996, I was having dinner with a friend who had been offered the position, but he rejected. The main point of our conversation was the impossibility of doing anything to meet Menem's desire to remain until December 2003 other than to ruin the economy (btw, in 2003, Menem won the first-round election but he opted out of the second-round because he knew his Party was going to support Nestor Kirchner).
So what can Milei negotiate with the current Congress in the next two years? And with the current Judiciary (yes, lawfare has dominated Argentina's complex judiciary for a long time)? It has been a huge surprise for Milei to become president, so let us hope he can get at least 50% of what he has already announced (it'd be much more than anything Menem did after March 1991).
It's hard to tell from your comment above what part Bryan got wrong. Can you point me to an actual mistake he made?
Sorry, David. I didn't say Bryan made mistakes. I'm saying he is missing details of relevant past experiences --the ones that Gordon Tullock used to pay attention when trying to understand what happened and what may happen. Those details are related to how politicians had attempted to get and keep power, and indeed their strategies are expected to take into account the field in which they are playing. Since I cannot tell you all the experiences of the past 100 years, I selected the one that could be most relevant today.
In addition, since I have been very familiar with Chile history over the past 51 years, I can tell you that what happened during Pinochet is irrelevant to what may happen to Milei (btw, a few days ago the Pinochet's Minister responsible for designing and implementing the fiscal reform of 1975 that facilitated all the other reforms passed away, and it was an opportunity to share ideas about that reform with a couple of old friends and how different that experience was from what is going on in Argentina).