Javier Milei at WEF-- the West is "in danger"

One month on from taking office as Argentina’s President, Javier Milei flew to Davos, Switzerland to attend the World Economic Forum (WEF) last week. As President of Argentina, this was the first foray into the global arena by the self-proclaimed “anarcho-capitalist.” He reportedly said on his way to Switzerland that he was attending the WEF to advocate freedom.

Milei travelled on a commercial flight to save the estimated US$300,000 to hire a chartered flight. He surprised his fellow passengers on abroad the plane taking selfies and telling reporters that he aimed to ‘seed ideas of freedom in a forum that is contaminated by the 2030 socialist agenda”.

Speaking at the WEF on Wednesday (January 17) Milei warned that “the Western world is in danger”. “It is in danger because those who are supposed to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism, and thereby poverty”, he further added.

Milei was one of the keynote speakers at the high-profile Davos summit, which brought together more than 100 representatives of governments, multilateral organisations, businesspeople and leaders from various fields. WEF founder Clause Schwab described Argentine President’s methods as “radical” and introduced him as “a new sprit to Argentina, making Argentina much more related to free enterprise, to entrepreneurial activities”. Milei then went on to claim that socialism murdered 100 million people.

Milei launched an extraordinary broadside against socialism and said that socialism had done nothing but plunge Argentina into poverty. He then declared that free market capitalism was the only system that could generate true prosperity – both for his country and others. He also told the world’s political and business leaders that they must realise the errors of their ways.

To lend support to his advocacy for free market capitalism thesis, he said, “The case of Argentina is an empirical demonstration that – no matter how rich you may be, or how much you have in terms natural resources…if measures are adopted that hinder the free function of markets, free competition, free price systems, if you hinder trade, if you attack private property, the only possible fate is poverty”.

He accused Western leaders of abandoning their model of freedom and taken over by “variants of collectivism”, linking these supposed beliefs to overreaching state intervention and push for social justice. He urged businesspeople not to be intimidated by “the political caste or by parasites who live off the state’.  He then added, “It should never be forgotten that socialism, always and everywhere, an impoverishing phenomenon that has failed in all countries where it has been tried out”.

He rejected the idea there could be something called market failure, since markets simply reflect participants’ voluntary exchange of ownership rights.  He does not consider monopolies as market failures. He then added that on the pretext of supposed market failure, regulations are introduced which only create distortions in the price mechanism causing distortions in saving, investment and growth.

“The state is not the solution. The state is the problem” he declared. His 23 minute address ended without taking questions and thanking the audience, finally concluding in his  usual style saying,“viva la libertad, carajo” (Long live freedom, damn it).

He is keen to win backing for his economic ideas which include closing the central bank and adopting the US dollar. He has already devalued the currency by more than 50 per cent and cut federal ministries by half. The government has announced a series of spending cuts to solve Argentina’s “addiction to fiscal deficit”.

IMF head Kristalina Georgieva on last Wednesday told CNN that she welcomed Milei’s radical agenda. In another interview in Davos, she said “Argentina’s economy is in such a bad shape that it must be shaken up. President Milei and his team are doing exactly that”.

The IMF last week also delivered a vote of confidence in Milei’s economic reform plan and announced that it could release US$4.7 billion from US$43.0 billion loan programme with Argentina, provided certain conditions were met.  Argentina is its largest debtor.

Milei has a background in economics, used the WEF to espouse his part neo-classical economics lecture, part Trumpian tirade calling for small government for removal of bureaucratic elites, culling of gender equality policies and attacking collectivist economics and wealth redistribution. These are standard far right rhetoric  and he used them to mask the lack of genuine arguments.

In economic history, Argentina is possibly one of the most studied countries. Argentina’s economic and institutional decline has long posed a conundrum to economists and social scientists. One of the most cited quotes in economics, originally attributed to Simon Kuznets who says that there are four types of countries – developed, underdeveloped, Japan and Argentina. In the field of development economics, Argentina perhaps is the most interesting and perplexing of these cases.

Once one of the richest and fasted growing countries in the world, Argentina is now firmly entrenched in the ranks of developing countries. The Belle Epoque, i.e., post-1913, the turn of the century golden age is now a dim and distant memory for most Argentines today. Milei appears to make Argentina’s economic decline very simplistic to look at, but the real story is far more complex and goes beyond the free-market vs socialism debate.

A vast literature emerged offering various competing explanations for such extraordinary long-run relative economic decline of Argentina. Among the explanations include deleterious conditions for capital accumulation in the post Belle Epoque period. The trade (exports + imports)/GDP ratio was more than 50 per cent in the pre-WWI period but during the interwar period fell to about 20 per cent or slightly above and that did not change much after the WWII.

Also, Argentina’s political history is replete with political crises since the 1930s. In fact, some analysts argue that the onset of electoral fraud in the 1930s as the major turning point and corresponding erosion of the rule of law as the major contributing factor in the country’s economic decline.

Milei is a far-right political outsider often compared to former US President Donald Trump and former Brazilian President Jair Bolsonaro. His term in office will continue until the end of 2027. The danger of far-right fascism is now a global phenomenon, not confined to Trump or Bolsonaro as demonstrated by Modi in India to Meloni in Italy, Victor Orban in Hungary and Geert Wilders in the Netherlands among others. Now Milei is joining the rank with them and   like them is a very divisive figure, dividing society into “good Argentines” and “leftists and thieves.”

Milei, a political outsider, won Argentina’s presidential election in November, following an unconventional campaign where at one point on the campaign trail, he even wielded a chainsaw to symbolise his intent to cut state spending. He made big promises to overhaul the battered economy including to stamp out hyper-inflation which reached 211 per cent in December, the highest level in three decades while 2 out of 5 Argentines now live in poverty. GDP is set to shrink by around 2.5 per cent this year.

Milei is well known for his outbursts against government spending, especially social spending, great admiration for the US and Israel, and obscurantist beliefs. Milei is also staunchly anti-abortion, favours looser gun laws, supports privatisation of education and health care and criticises Argentine Pope Francis.

At home, he is now battling to fix the country’s worst economic crisis in decades. He hopes to tame annual inflation currently running at 211 per cent (December 2023), build up foreign currency reserves and lure back investment.

Milei elected on a platform of radical reform has embarked on a sweeping deregulation, reducing the size of the bureaucracy, devaluing the currency by more than 50 per cent. But his radical reform measures have already sparked political protests but got nod from the IMF. His party also does not command a majority in both houses of parliament which could block some of his fiscal measures. He also faces strong opposition from powerful trade unions to his reform programmes.

Challenges facing Milei’s presidency now are significant and Argentina is once again in the grip of a profound crisis.

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