Milei Milieu

On the president-elect of Argentina

A rothbardian libertarian economist and literal rock star who wants to delete his country's central bank is elected president. Argentina even recently lowered its voting age in an effort to preserve the Peronist status quo and Javier Milei won anyway. The attacks on Milei, both from people inside as well as outside of Argentina, is a testament to the well-functioning of their voting apparatus. Milei won this election powered mostly by disgruntled young people. His success is a prerequisite for domestic peace in Argentina in the coming years.

An Argentine friend who lives in Buenos Aires and is a working age person with a birth year that starts with “2” provided most of the context for this piece. Another excellent source is BowTiedMara, in particular, his recent appearance on Milkshakes Pod. In that podcast, Brent Johnson reminds us of Warren Harding who presided over the "Forgotten Depression." President Harding responded by cutting the fiscal budget by 50% and by cutting taxes. What followed were the roaring 20s. I hope that Argentina experiences a similar renaissance. Time will tell. The world will watch in real time as they experiment with Austrian economics, if Milei can manifest even a fraction of his audacious plans. If he fails, this precedent will likely be used by neo-Keynesians for decades as a cautionary tale against laissez-faire economics. May he succeed.

Fiscal and social conservative

Milei is interesting primarily because of his economic views and how radically divergent they are from Peronism or Kirchnerism but it has to be said that he is deeply conservative in other ways. He revealed during his conversation with Tucker that he believes that life begins at conception and is completely against abortion. He's about as far as you can get from woke without falling off the end of the scale. He’s against affirmative action.

But, his biggest beef is with socialism. Milei wants the government to do less. A lot less. He's against all forms of government intervention including wealth redistribution. The history of Argentina and Peronism has demonstrated that those in power tend to redistribute wealth to themselves and their friends. Strong central authority corrupts. The antidote is reducing the size and strength of that authority. This is why Milei's signature prop is the chainsaw and his catchphrase: "Afuera!"

Afuera!

The principal entity under his chainsaw is the central bank. Inflation has run 400% this year. His plan to arrest it is to dollarize. According to the "impossible trilemma" any country that pegs its currency to the US dollar or outright adopts the dollar, necessarily imports US monetary policy. If your monetary policy is in the hands of another country, then your country doesn't need a central bank. If he succeeds at dollarization then his plan is sensible and will be accretive to his budget cuts. If he is not able to dollarize and yet gets rid of the central bank, that could be interesting.

Remaining with the peso and eliminating the central bank would mean that interest rates would be determined by the market. The policy rate for leliqs is already 250%. If they let go of control of rates and keep printing money, the current rates may eventually seem low. Dollarizing is practically a prerequisite for closing the central bank. I hope he succeeds at both.

The view from the ground

I have a sample size of one, but my contact in Argentina is very politically clicked in and so I'll assume some amount of ergodicity and consider her perspective relatively representative of the spirit of young, working age people. Young people in Argentina LOVE Milei. They are the ones getting crushed hardest by inflation. A typical salary is $600 a month. Rent is $300. Electricity $200. Food $200. Almost no one can live independently from their parents when they enter the workforce.

Milei has built credibility with this cohort in part by donating his salary to a different person every month and posting about it on social media. They trust that he actually cares about them. He wants to make the streets safer so people can go out without fear. He wants to remove impediments to work like the onerously high monthly tax on cars. In almost everything I heard from my friend on the ground, young people in Argentina want what young people everywhere want: freedom and independence to make their way in life under their own power. Unemployment is 40%. Ultimately, young people are the source of growth for an economy. I hope they are unleashed.

People are fed up with corruption and politicians who want to turn citizens into dependent vassals: "We seek to put aside corrupt governments that create citizens dependent on a state that condemns them to poverty in exchange for a vote that perpetuates them in government." What's going on in Argentina is no less than a quiet revolution in the form of the hope placed in Milei. If they aren't successful with a quiet one, you can expect a louder one.

Javier Milei takes office in one week. It will be nice to see an elected leader with more than a passing understanding of the power of the invisible hand or the principle of supply and demand.

Congratulations and godspeed, President-elect Milei.