The Patriot Post® · Argentina's Capitalist Counterrevolution Is Off to a Good Start

Javier Milei, who this week marks his first anniversary as Argentina’s president¹, has a few things in common with Donald Trump.

Both are brash, flamboyant, and unrestrained by traditional notions of presidential gravitas. Both campaigned for office on a platform of dramatic changes that would make their respective countries great again. Each professes admiration for the other — Trump calls Milei his “favorite president”² and Milei has praised Trump, even embracing him in a bear hug³ when they met for the first time in February. And both are detested on the left⁴.

But in other, more important ways, Milei is anything but the “mini-Trump⁵” his critics decry.

Argentina’s president is a serious economist with a profound understanding of macro- and microeconomics, finance, mathematics, and the elements of economic growth. He was a university professor for 20 years, held multiple high-level positions in the private sector, and has published more than 50 scholarly papers. Milei’s grasp of the issues extends far beyond the slogans and bluster that are Trump’s trademark. Notwithstanding his gaudy style — the chainsaw he brandished on the campaign trail⁶, his battle cry of “Long live freedom, damn it!⁷,” his self-description as an “anarcho-libertarian” — his passion for economic and political liberty is not just a pose to galvanize his base but a clear and focused worldview backed up by decades of study and experience.

Nor does he pander to the public. As a candidate for president, Milei spoke bluntly not only about the wholesale changes he intended to pursue — extreme cuts in government spending, systematic deregulation, the elimination of government agencies and tens of thousands of government jobs, a halt to public construction projects — but also about the short-term pain his reforms would inflict. But he promised voters that if they stuck it out, they and Argentina would be the better for it.

One year into his presidency, what Milei has accomplished is extraordinary.

At a time when governments and politicians worldwide have been unable to reduce the size and cost of the state⁸, Milei “has shown that the continual expansion of the state is not inevitable,” marveled The Economist⁹ in a recent issue. “His chainsaw has cut public spending by almost a third in real terms, halved the number of ministries, and engineered a budget surplus.”

Within weeks of taking office, Milei had reduced government outlays enough that for the first time in 10 years, Argentina had a balanced monthly budget. By April, it was reporting its first quarterly surplus since 2008. A year ago, according to International Monetary Fund estimates¹⁰, government spending in Argentina amounted to more than 38 percent of GDP. Now, the IMF calculates, Buenos Aires is spending just 32 percent of GDP. In real terms, Milei has cut government outlays by 30 percent¹¹ compared to last year — a phenomenal accomplishment.

In what Bloomberg calls¹² his “almost monomaniacal resolve to cutting spending,” Milei has canceled nearly four-fifths of public infrastructure projects, eliminated or downsized 12 government ministries, cut the costs of pensions by 21 percent, and shrunk the public payroll by a fifth. For years, Argentina’s central bank printed money to cover the government’s perpetual deficits, a practice that drove inflation sky-high. When Milei was elected, Argentina had the highest inflation rate in the world — 211 percent in 2023¹³ — and prices were rising by 25 percent per month. According to the most recent data, the monthly inflation rate is now 2.7 percent¹⁴ — a stunning improvement.

As Milei warned, the austerity campaign has hurt. Unemployment is up sharply¹⁵. The poverty rate has jumped to 53 percent. There will be even more pain when government subsidies for fuel and public transportation are cut. If the economy is to be restored to lasting health, those cuts cannot be avoided, since the ratio of government beneficiaries to taxpayers¹⁶ is currently an unsustainable 2 to 1. When push comes to shove, will the public have the stomach to tough it out? Or will the backlash be strong enough to bring Milei’s revolution to a halt?

So far, Argentines have given their unconventional president the running room he needs to liberate the nation’s economy. His approval rating last month was 47 percent, several points higher than it was in October and slightly more than his disapproval rate. Milei is also more popular than his two predecessors were after their first year in office.

It isn’t only the incredible plunge in inflation that accounts for the optimism of so many Argentines. There is also the new administration’s determination to free the country from overregulation. “Milei and his team have slashed reams of red tape tangled around everything from air travel and apartment rentals to divorce and satellite internet,” The Economist reported¹⁷ last month. “Every day we deregulate,” Milei told the magazine, “and we still have 3,200 structural reforms pending.”

The power of deregulation to improve a nation’s economy and quality of life should not be underestimated. After Milei repealed Argentina’s rent control law¹⁸, to mention just one example, the supply of rental units skyrocketed and rents stabilized. Buenos Aires “is undergoing a rental-market boom,” The Wall Street Journal recounted in September, and “many renters are getting better deals than ever.” By overturning dozens of other regulations, price controls, and bureaucratic barriers, Milei’s changes¹⁹ have made Argentina considerably more attractive to investors and entrepreneurs.

Wall Street has certainly noticed. An exchange-traded fund that tracks Argentine stocks (ticker symbol ARGT²⁰) has boomed since Milei was sworn in, its assets soaring²¹ from $104 million in December 2023 to $734 million last week. Past performance does not guarantee future results, as investors are always reminded. But just one year ago Argentina’s economy was a basket case, beset by stagnation and hyperinflation.Milei convinced voters that the remedy for what ailed Argentina was not more government spending but less, not a bigger state but a smaller one, not more trade barriers but fewer. To their credit, voters gave him the chance to prove himself. To date, he hasn’t let them down.

At the end of the 19th century, Argentina was one of the richest nations in the world²². It was undone by decades of socialism, especially the left-wing populism and government aggrandizement imposed by the authoritarian Juan Perón and his wife Evita. What Milei has undertaken is nothing less than a capitalist counterrevolution. He is off to a remarkable start.