In September 2023, amidst a fervent election rally in Buenos Aires, presidential candidate Javier Milei dramatically showcased his economic agenda by brandishing a roaring chainsaw. This potent symbol represented his plan to drastically cut down Argentina’s bloated state, which he believed was crippled by debt exceeding its annual economic output.
Milei, known for his unconventional and often provocative style, has a history of dismantling economic inefficiencies, even smashing a piñata of the Central Bank on live television in 2018. His presidency, which began in December 2023, inherited an economy grappling with over 211% annual inflation and a poverty rate affecting 40% of the population. Decades of high public spending, deficit financing through money printing, and reliance on borrowing had plunged the nation into a cycle of debt and rampant inflation.
Nearly two years into his term, the macroeconomic landscape has shifted significantly. Argentina has achieved its first fiscal surplus in 14 years, and inflation, which had soared into triple digits, has reportedly fallen to around 36%. These improvements have earned Milei praise from international allies, with UK Conservative leader Kemi Badenoch calling his policies a “template” for her party, and former US President Donald Trump endorsing him as “my favorite president.” The two leaders are set to meet at the White House.
However, Milei’s “fiscal shock therapy” has not been without controversy. Heated protests have erupted on the streets of Argentina, sometimes escalating into clashes with police. Critics, such as left-wing economist Mercedes D’Alessandro, argue that while Milei promised the “caste” – the wealthy, politicians, and businessmen – would bear the brunt of the austerity measures, the burden has actually fallen disproportionately on the working classes, impacting pensioners, hospitals, and public services.
The textile industry, for example, has faced significant challenges. Luciano Galfione, chairman of the non-profit Fundacion Pro Tejer, points to daily factory closures and job losses. He criticizes Milei’s decision to cut import tariffs and regulations, arguing it creates an uneven playing field against countries with lower labor costs and fewer environmental standards. “Our sector lost more than 10,000 direct jobs,” he stated, highlighting the impact on domestic producers.
Milei remains steadfast in his belief that his reforms will ultimately improve the lives of ordinary Argentines. He argues that taming inflation and reducing the deficit are crucial steps towards long-term prosperity, lower taxes, and greater economic stability, which he believes will encourage investment. Yet, economists like Alan Cibils remain skeptical, questioning whether the current stability can be sustained.
Milei’s outsider status, while potentially shielding him from traditional political criticisms, has also been linked to a perceived lack of empathy. Following a poor performance in local elections in September, his political support waned, causing market jitters. With midterm elections approaching, the nation is poised to deliver its verdict on whether Milei’s drastic measures, however successful in certain economic indicators, will be politically sustainable.
Economists like Martin Rapetti acknowledge the difficult starting point, noting the widespread “mess” and a populace feeling their money “slipping like water through their fingers.” He points to Milei’s viral moments, like ripping ministry names off a whiteboard, as emblematic of his radical approach to austerity, which included halving government ministries, cutting public sector jobs, and slashing budgets for essential services.
Milei’s supporters, like economist Miguel Boggiano, see these actions as necessary to restore credibility and believe he could become a model for other nations. However, critics express concern that the social costs and potential for unrest could unravel any economic gains. The upcoming elections will be a critical test of Milei’s mandate and the viability of his economic experiment.