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A Beacon of Hope for Argentina’s Economy

A Beacon of Hope for Argentinas Economy

Argentina's economic revival under President Milei: Challenging collectivism and implementing reforms for economic growth in the face of a historic downturn.

In the course of modern history, many economic tragedies have occurred. While one can argue when stating which one of them was the worst, Argentina emerges as the clear winner when it comes to being named as one of the most profound economic failures along the way. Once ranked among the top 10 wealthiest nations globally, ever since Peronism, Argentina has faced a spiraling economic downturn, with ongoing financial imbalances and three digit inflation rates contributing to its economic instability – but only until recently. President Javier Milei has come to the rescue of Argentina, fighting against the deeply rooted left-leaning legislature while cutting government growth. In the current landscape, where leaders are revisiting protectionist economic policies, Milei seems to have learned a valuable lesson from Argentina’s past. As the philosopher George Santayana stated, “Those who do not remember the past are condemned to repeat it.” In Milei’s case, it appears that he has undertaken a thorough review of Argentina’s history to guide his policy decisions – taking a cue from the country’s past slip-ups, and now striving to undo the damage, his focus is on redeeming economic stability and steering the nation back on track.

Milei’s Vision: Challenging Collectivism and Proposing Change

In his speech at the World Economic Forum in Davos, Milei discussed the problems of collectivism and government-owned property, warning the West that these socialist values will only lead to poverty. The classical liberal values that are “morally desirable” according to this speech, have lead humanity to experience exponential growth, also known as the hockey stick of growth, fueling economic expansion and wealth, with free-market capitalism as the real force behind this phenomenon. Although at this point, the only indicators in Argentina that exhibit this pattern are the inflation rates and CPI index, results which are attributable to socialism. As Milei stressed, Argentina needs free enterprise capitalism to revert the trend. Ever since his election in November, Milei has taken action by reducing monthly inflation, balancing Argentina’s budget deficit for the first time in twelve years, and consolidating the country’s ministries by halving them from 18 to 9. But yet again, much more needs to be done.

The Skeptic’s View: Mitchell’s Concerns and the Battle for Reform

Restoring economic liberty is a challenging issue that will take time to resolve. Argentina’s wealth and people’s livelihoods have been ruined by decades of Peronism, and this has had a negative impact on many aspects of people’s lives. Daniel Mitchell applauded Mileis success so far, but he fears that it might not be enough. In his latest article he states: “I don’t know how much progress he’s made. But I’m guessing he only solved 5-10 percent of the problem with his executive actions… The main battle will involve whether Milei can now somehow convince a hostile legislature to approve structural reforms.” Mitchell`s skepticism goes on as he fears that there is only so much that can be done for Argentina, as implementing structural reforms in the legislature will not be an easy task, since Mileis party is far from owning the majority of the votes even with the support of his allies. Read more on Dan Mitchell’s take here.

Exploring Solutions: The Role of ‘Dollarization’ in Argentina’s Recovery

As Milei is facing limited options to what else can be done, dollarization could be a potential and urgent matter that should be looked into. Taking into consideration that the Congress is an obstacle to passing the government’s proposed laws, one thing that has been done before and can be implemented again is shutdown of any institution. Potentially, Milei could order the shutdown of the central bank and start the process of dollarization as it would be a necessary step towards not only fostering a stable currency, but also limit government budgeting in the long run as printing money wouldn’t be feasible anymore. The bright side is that Argentina already has enough dollars to “dollarize” but these dollars are kept outside of the financial system since official exchange rates are about 30% lower than unofficial “black market” exchange rates. The goal should be to start the transition now and dollarize the economy before the next elections so that the process won’t be offset by anti-dollarization candidates.

The outcome of Mileis presidency is hard to predict as he faces a great challenge, and even greater expectations are set for him as he faces the challenge of fulfilling his promise to restoring his country.

Author

  • Alberta Bikaj

    Alberta Bikaj is an intern at the Austrian Economics Center and a master's student in Economic Policy at Central European University (CEU). She holds a bachelor's degree in International Economics, Finance, and Business and is passionate about economic policy, finance, blockchain, and digital transformation.

The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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