All Commentary
Wednesday, November 29, 2023

What Americans Can Learn From Argentina’s Collapsing Economy—and Javier Milei’s Stunning Victory

Argentina’s triple-digit inflation might be new, but its economic dysfunction goes back decades.

Image Credit: Vox España

Argentines elected 53-year-old political outsider Javier Milei as their new president on Sunday.

Milei, an economist and self-described libertarian, pulled in nearly 56% of all votes counted in his runoff against left-wing rival opponent, Sergio Massa, completing one of the most unlikely presidential victories in modern history.

Milei first stunned the world in August when he managed to pull in 30% of the vote in Argentina’s presidential primary, far above what political prognosticators had anticipated.

“I think these results are surprising even to him,” Pablo Touzon, an Argentine political consultant, told the New York Times in August.

Though Milei fell short in the October general election, receiving 29.9% of the vote to Massa’s 36.6%, he emerged triumphant in the runoff Sunday. His victory clearly stunned the media establishment, which insisted on describing Milei as “far-right” and in the mold of former President Donald Trump.

In truth, Milei is much closer to F.A. Hayek or even Milton Friedman than Trump. He supports abolishing Argentina’s central bank, slashing government spending, and eliminating a slew of government ministries — including the Ministry of Culture; the Ministry of Women, Genders, and Diversity; the Ministry of Public Works; and the Ministry of Transport.

However one chooses to describe Milei, it’s clear his rise marks a total rejection of Argentina’s political establishment after years of economic pain.

Here is the man who was just elected President of Argentina, detailing his plans for the

— Spike Cohen (@RealSpikeCohen) November 19, 2023

The poverty rate in Argentina is above 40%. Inflation, meanwhile, has been in the triple digits all year, and it continues to rise. Argentina, the second-largest economy in South America, has battled inflation for decades, but inflation has spiraled out of control in recent years.

In 2011, the exchange rate for one United States dollar was 3.45 pesos. Today, a dollar is exchanged for 352 pesos. (Black market rates for the dollar are much higher.)

Reuters recently reported that inflation has become so bad that many in Argentina can no longer afford to buy new products but instead shop and trade at street markets for used items.

“We simply can’t buy new things,” Maria Teresa Ortiz, a 68-year-old retired worker, told the news agency. “You can’t buy new sneakers, you can’t buy new flip-flops, you can’t buy new jeans, you can’t buy a shirt or a T-shirt either. So you have to look for them at the fairs.”

Americans who think they have little to learn from this spiraling South American country should realize that Argentina was once one of the wealthiest countries in the world.

Historians point out that just before the beginning of World War I, Argentina was richer than the primary European powers, Germany and France, and almost twice as wealthy as Spain. Its per-capita gross domestic product was on par with that of Canada, and up until the Great Depression, it was one of the largest exporters of food in the world.

In 1929, however, Argentina abandoned the gold standard, a move that was followed by new protectionist trade measures. The aftermath of World War II would usher in strongman Juan Perón, giving rise to Peronism, a blend of national socialism and fascism that would dominate Argentina’s political system for the next 75 years.

Argentina’s triple-digit inflation might be new, but its economic dysfunction goes back decades. It defaulted on its debt three times in the last quarter century alone, even as it continued to expand the state’s role in (and grip over) the economy. All of this spelled disaster for Argentines.

“The problem with socialism,” Margaret Thatcher once quipped, “is that you eventually run out of other people’s money.”

This is not technically true, of course. Those in power can just print more money to paint over economic problems instead of addressing them — which is exactly what Argentine politicians did.

This image shows why Javier Milei is Argentina’s new president.

The government destroyed the currency and 40% of the people are now in poverty.

— Jon Miltimore (@miltimore79) November 20, 2023

The results were catastrophic, and Milei is now being tasked with cleaning up the mess. Hopefully, he succeeds. But it’s also important to understand how Argentines arrived in these dire straits: They believed a lie.

“The state is that great fiction by which everyone tries to live at the expense of everyone else,” the 19th-century economist Frederic Bastiat once observed.

If Americans fall for the same lie — that they can enrich themselves by creating a society that allows them to plunder their neighbor — their economic future will be similar to Argentina’s. And they may not have a Javier Milei to rescue them.

This article first appeared on The Washington Examiner

  • Jonathan Miltimore is the Senior Creative Strategist of at the Foundation for Economic Education.