Milei's Argentine Miracle

Milei’s Argentine Miracle

By Lawrence W. Reed

You won’t hear it from CNN or the rest of the left-wing, fake-news media but a miracle is well underway in Argentina.

We’ve seen this movie before. The plot goes like this: Socialist politicians promise the sky and then drive a country in the other direction—into the ground. They learn nothing from the damage they do, so sooner or later someone who understands basic economics and human nature fixes the mess with less government and more capitalism.

I know of no historical example of the reverse, in which capitalism creates a disaster and socialism fixes it. None.

In the late 1940s, German socialism was scrapped in favor of a free market (capitalist) economy and within a decade the world marveled at the “German economic miracle.” At about the same time, Japan boomed for largely the same free enterprise reasons.

Likewise, as Britain embraced “democratic socialism” after the war, its Asian possession—Hong Kong—blossomed into the freest, most capitalist economy on the planet; in a few years, Britain degenerated into “the sick man of Europe,” eventually necessitating the Thatcher revolution, while Hong Kong enjoyed soaring standards of living even as its population exploded by a factor of ten.

By the 1980s, New Zealand’s socialist welfare state had produced dispiriting stagnation. Then over a two-year period, Auckland cut the size of government from 60 percent of the economy to less than 40 percent, deregulated markets and slashed government spending. Now as one of the world’s freest economies, a free New Zealand solves problems instead of creating new socialist ones.

As New York City’s Democratic nominee for mayor is promising government-owned grocery stores, huge tax and spending hikes, price and rent controls, and “free” this and “free” that, many people who once went down that path are concluding that the guy is a lunatic—with no real-world work experience and a worthless paper diploma from a left-wing college. And they’d be right.

And now, back to Argentina. A little more than a century ago, it was one of the wealthiest countries in the world. Then a succession of socialist regimes de-capitalized the country with a massive expansion of government, taxes, welfare spending, subsidies and price controls, money printing, protectionism, corruption, and bureaucracy. Into the dumpster went Argentina.

Were the socialists in Argentina just dumb as a box of rocks? Did they watch so much CNN that they didn’t know either economics or history? Economist Daniel Lacalle smells a rat. Assessing recent governments in Buenos Aires, he concludes that they “did not sink the currency, the economy, and the income of Argentinians due to incompetence, but by design: to create a dependent society enslaved to the predatory state like in Venezuela, Cuba, and Nicaragua.” The state is the God of the socialist religion, so whether socialists are evil or stupid is always a flip of a coin.

Argentines finally learned their lesson and had enough of socialism’s cynical promises and lousy results. In November 2023, they elected Javier Milei as their president. Wielding a chain saw, he pledged to slash the bloated public sector and free the economy.

Milei knows history and economics and he’s not interested in planning other people’s economic lives “for their own good” as socialists like to do. He once explained Argentina’s recent past in these terms:

Thirty five years after we adopted the model of freedom, back in 1860, we became a leading world power. And when we embraced collectivism over the course of the last 100 years, we saw how our citizens started to become systematically impoverished, and we dropped to spot number 140 globally.

In his first 18 months in office, Milei eliminated half of the central government’s cabinet departments. He cut the public payroll by tens of thousands, allowing for both tax reduction and private sector growth. The chronic budget deficit is now gone, and the budget runs a surplus. The inflation rate, one of the highest in the world barely two years ago, is now one-tenth of what it was.

Rent controls under the previous regime of socialist “planners” caused massive shortages. Milei got rid of the controls and now Buenos Aires boasts falling rents and new properties coming onto the market every quarter.

The nation’s poverty rate was sky-high in 2023. Today it is lower than when Milei took office. The economy, previously in chronic recession, is now growing at an astonishing 6 to 7 percent. Polls show that Javier Milei is one of the most popular presidents in the world.

The Argentine economic miracle is unfolding before our very eyes. Perhaps “miracle” isn’t the proper term, however, because that suggests the transformation defies the rules of nature or the laws of economics. It really doesn’t. It is simply what happens when coercive, vote-buying, Big Brother government gets out the way, keeps the peace, and otherwise leaves people alone.

Javier Milei is a hero, a model statesman with the courage to do the right thing. His candor puts to shame the mealy-mouthed, duplicitous politicians so typical in the world today. I close with a sample of his most incisive observations:

The state does not create wealth; the state destroys it. The state can give you nothing because it produces nothing, and when it attempts it, it does so poorly.

If printing money would end poverty, printing diplomas would end stupidity.

Far from being the cause of our problems, free trade capitalism as an economic system is the only instrument we have to end hunger, poverty and extreme poverty across our planet. The empirical evidence is unquestionable.

Countries that have more freedom are 12 times richer than those that are repressed. The lowest percentile in free countries is better off than 90% of the population in repressed countries. Poverty is 25 times lower and extreme poverty is 50 times lower. And citizens in free countries live 25% longer than citizens in repressed countries.

It should never be forgotten that socialism is always and everywhere an impoverishing phenomenon that has failed in all countries where it’s been tried out. It’s been a failure economically, socially, culturally and it also murdered over 100 million human beings.

The case of Argentina is an empirical demonstration that no matter how rich you may be, how much you may have in terms of natural resources, how skilled your population may be, how educated, or how many bars of gold you may have in the central bank—if measures are adopted that hinder the free functioning of competition, price systems, trade and ownership of private property—the only possible fate is poverty.

For related information, see:

Ludwig Erhard: Architect of the German Economic Miracle

The Man Behind the Hong Kong Miracle

What Caused Japan’s Post-War Economic Miracle?

Thatcher on Socialism

New Zealand’s 40 Years of Free Market Success

 We’re Still Crying for Argentina

How Venezuelans Can Recover from the Sickness of Socialism

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(Lawrence W. Reed is President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty at the Foundation for Economic Education in Atlanta, Georgia. He blogs at www.lawrencewreed.com. Permission to reprint is hereby granted, provided the author is credited.)