What do you call it when a reform-committed new president of a once prosperous but now largely failed socialist-led country plans to cut 70,000 government jobs as part of his efforts to return the country to fiscal sanity? A darn good start!
Or maybe, a model for the United States!
President Javier Milei of Argentina took office Dec. 10 to much fanfare from Argentines and general skepticism and disdain from the left and the media, including the U.S. media.
A libertarian economist who describes himself as an “anarcho-capitalist,” Milei campaigned with a chainsaw pledging to cut the size of government, lower inflation, switch currencies from the Argentine peso to the U.S. dollar and shutter the country’s central bank. Milei won the presidential election with 56 percent of the vote, including an impressive showing of young voters.
Here’s what he was up against when he entered office. Inflation over the past year was up 276 percent, the highest in the world, according to The Economist. The government owed $263 billion to foreign creditors. And an estimated 50 percent of Argentines were in poverty.
So, how’s Milei doing just a few months into his presidency? Promises made, promises kept.
Voice of America writes, “Once in office, he cut the Cabinet in half, to nine ministries, slashed 50,000 public jobs, suspended all new public works contracts and ripped away generous fuel and transport subsidies.” I like this guy!
And now he plans to cut another 70,000 government jobs, though that’s a fraction of the country’s 3.5 million public sector workforce, and end more than 200,000 social welfare programs because of corruption.
Importantly, Milei has slashed government spending in an effort to balance the budget, and foreign reserves have grown to $7 billion.
Inflation was 25.5 percent for December, dropping to 20.6 percent in January and 13.2 percent in February. Still outrageously high, but moving quickly in the right direction.
Public confidence has grown from 20 percent in December to 47.7 percent in mid-March.
While Milei’s reforms have been a shock to Argentina’s economic system — including some economic pain for many families — it had to be done, and done quickly so the public could begin seeing positive results.
Soon, Milei plans to shutter the country’s central bank, which won’t be needed if he dollarizes the economy. Central banks should act independently of politics. When politicians largely control central bank policies — as they typically do in socialist and autocratic countries, including Argentina — the politicians tell the bank to print more money so they can spend (or steal) it. That’s one reason why Argentina has such a high inflation rate.
But how did Argentina, which was once one of the most prosperous countries in Latin America, became such an economic basket case? The short answer is: Juan Peron, a populist, socialist autocrat.
Peron became president of Argentina in 1946, though he was overthrown in 1955. He won the presidency again in 1973, but died in office in 1974, whereupon his wife, who was vice president, became president.
Peron expanded the power of unions, arbitrarily raised wages, nationalized a number of industries (including railroads, utilities, public transport, etc.), initiated government-provided retirement and health care benefits, and he tried to reduce foreign trade in favor of domestic manufacturing. In other words, he pretty much embraced the same policies as Sen. Bernie Sanders (I-Vt.), Rep. Alexandria Ocasio-Cortez (D-N.Y.) and all the other progressives — including President Biden.
Peron had to find the money to pay for his expansion of government, wages and benefits, which means raising taxes on the wealthy, spending more money than the government takes in and getting the central bank to print money to cover the deficits.
Sound familiar? It should. That’s similar to what Biden’s been doing or trying to do.
Of course, Peron has been gone for decades. But Peronist Nestor Kirchner was elected president in 2003, and in 2007 his wife, Cristina Kirchner, ran for president and won. She remained in office until 2015, and from 2019 to 2023 served as vice president.
After so many years of populist and socialist corruption and financial mismanagement, Argentina’s voters decided they’d had enough and gave Milei’s free market economics, limited government and fiscal responsibility promises a chance.
His first three months have been encouraging, but Milei has a long way to go, with roadblocks at every turn, especially from labor unions. But if he’s successful, he may provide a model for U.S. politicians who want to challenge the Peronist-like policies of Biden and his fellow progressives.
If Argentina can return to free markets and fiscal responsibility, maybe the United States can, too.