Posted on 12/11/2024 5:01:46 PM PST by SeekAndFind
The economy would crash, the markets would be in open revolt, and he would swiftly be evicted from office by the IMF, and replaced by some “grown-ups.” When Argentina elected its chainsaw-wielding, libertarian President Javier Milei a year ago, the economic and political establishment confidently predicted he would only last a few weeks. And yet, not only has Milei managed to stay in power, all the evidence suggests that he is turning Argentina around. The real question now is this: will stagnant and moribund western countries pay attention?
With inflation running at 25 percent a month, with the largest IMF loan in history to pay back, and with the currency in freefall, the Argentina that Milei took over had become synonymous with mismanagement and decline. From abolishing subsidies, to scrapping rent controls overnight, to abolishing whole ministries, Milei embarked on a dramatic program of shock therapy designed to dismantle state control. He has not delivered on everything. The currency has not been replaced by the dollar, for example. And yet, he has done far more than most observers thought possible.
The results? Pretty good so far. Inflation has fallen to slightly over 2 percent per month, a stunningly low figure by Argentinian standards. The budget is back in surplus. The credit ratings agencies have started to upgrade its ratings, while downgrading countries such as France. Output is finally starting to expand again. Perhaps even more surprisingly, Milei’s support is increasing, with a 52.3 percent approval rating, according to the Tendencias consulting firm.
Milei keeps on going, and shows little sign of losing his radical edge. Only this week, he fired the head of the tax authority from trying to impose levies on digital influences and streamers. In his view, the last thing governments should be doing is going after people trying to make some money for themselves.
The West spends a lot of time debating how to reboot its stagnant economies. We debate industrial strategies, subsidies, creating “green jobs,” and developing partnerships between the state and industry. We assume complacently that the best we can hope for is to slow down the rate of growth of government spending, with actual cuts considered politically impossible. And governments look around more and more desperately for ways to raise taxes, or to borrow more, without considering whether there might be other options.
True, Argentina was in a far worse mess than anywhere in Europe right now. But France with no government, and a vast budget deficit despite collecting 45 percent of GDP in taxes, Italy sliding back into recession, and the UK where taxes on businesses have killed off any prospect of growth, are heading the same way. One year in, Milei is demonstrating that a radically different set of solutions is possible. Who knows, perhaps at some point the rest of the world will start wondering if he is doing something right.
One of few leaders in the world who still exhibits proper reasoning.
There has long been a core of Argentines who say they will never trust a bank with their savings. The most common form of saving is to stuff your mattress with US dollars. Some estimates suggest that Argentina possesses more dollar bills per person than any other country — including the United States. “I would rather be robbed by a thief than a bank,” was one savers’ assessment during the 2020 recession.
Such attitudes come from a deep distrust of the peso. To live in Argentina has been to endure decades of boom and bust economic cycles, characterized by extremely high inflation eroding the value of the national currency.
Javier Milei swept to his unexpected election victory last year amid triple-digit inflation with a promise to smash up the economic orthodoxy. He has since enacted a brutal regime of austerity to balance the books. Inflation has been, partially, tamed.
Admittedly, Year-on-year prices are still more than doubling, but even this represents a cooling from its high of nearly 300 percent. The trajectory is downwards.
Manuel Adorni, Milei’s spokesman announced this week that $18 billion has flooded into Argentine banks from mattresses, safe deposit boxes and overseas accounts. A tax amnesty introduced by the administration had been a “success,” he said, and the extra dollars would open up new credit opportunities to Argentine banks.
This is a sign of trust in Milei and his efforts to get the economy under control. In a further boost, Reuters reported that deposits in Argentine dollar-denominated accounts had also increased since June. The first round of the amnesty closed on Thursday.
Deposits of up to $100,000 were free of tax, with those above that threshold levied at 5 percent. This will increase to 10 percent in January and then to 15 percent in April. So officials will hope that the dollar rush isn’t over yet.
Milt Friedman strikes again.
It is my understanding that some leftists are kvetching.
Whether the kvetching is justified to any extent I do not know. Leftist love to kvetch as much as I like to pound keys.
I do know Argentina needed reform.
I probably should read the Argentine new sites.
Remember, ordinary people are treated like mushrooms - kept in the dark and bovine droppings.
He’s Trump on steroids!
Perhaps using the current vernacular would be appropriate. Complain all you want....
BTTT
My personal view after reading that is that he is doing a pretty good job.
Inflation, Argentina’s #1 problem, is being tamed. Waste is getting reduced.
If he has accomplished that much in 12 months I’d call that astounding. It should be expected that turning around a basket case country would take some time. Like a few years.
Remember, ordinary people are treated like mushrooms - kept in the dark and bovine droppings.
___________
Perfectly put.
Countries like Argentina and Turkiye have so much going for them in terms of resources and their ability to produce. They've written the book on mismangement though and the start of Argentina's turnaround is a victory for knowhow and commonsense.
It will take years to restore a culture of trust. I recall visiting Chile and then Argentina in 2009. In chile everything worked, people gave you the correct bill, the correct change, etc. In Argentina every third person seemed out to score some cash from you, cheat you, or shortchange you or had a hand out for something or other. I hope it has improved since then.
Turkiye was an interesting place in the mid 1990s. I recall a few attempted scams but they would back down once confronted. I was impressed that only the year before I visited that bus drivers were forbidden to smoke while driving the bus.
I’m honestly shocked that the globalists haven’t killed him, or had some sort of attack on the country to derail what he’s accomplishing there. What if other countries notice and follow suit?
The Argentine peso had extremely high inflation before Milei was elected. In December, there was a big drop after he was elected. Compared to the last few years, inflation has been much lower and relatively stable. Compared to the last five years it looks flat.
Milei stated what would happen when he was elected. It was going to hurt some before it gets better. The drop in the value of the Peso followed by more stable inflation shows he is delivering on what he promised.
Note to D and R party lurkers: Voters like it when their politicians (1) tell them the truth, I.E. do not lie to them, and (2) turn out to be right.
Interesting. Thanks for posting about it.
Yeah, it would take a long time to change the culture.
Only a thriving economy would provide the basis for that to occur.
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