CAN radical anarcho-capitalist economics without a central bank save the economically disabled state of Argentina with its inflation rate of more than 140% and 40% of its population in poverty?
Javier Milei, the radical populist elected president this month by a landslide, believes he can rescue the country and apparently has a strategy to do it. The central part of the plan is to “dollarize” the Argentinian economy, that is, switch the Argentinian peso over into US dollar equivalents and abolishing the country’s central bank, which Milei has called “one of the greatest thieves of all time”.
Milei is fanatically anti-socialist and plans to wipe out at least half a dozen government departments including culture, environment and sustainability, gender diversity and women’s issues, public works and public broadcasting. Privatisation is big on his agenda, but whether that will work in the interests of the country is debatable.
In relation to the country’s peso currency, Milei says when a product has no demand its price is zero. “What ever amount of currency a central bank wants to impose, the flip side is that the price level has infinity, so in other words it is a naturally inflationary economy.” He insists that dollarization will bring fiscal balance and that matter is not negotiable, otherwise the country will go into hyper-inflation.
Milei also accuses the country’s political class of stealing 5 points of GDP from the Argentine people. He says the dollarization program will avoid the same mistakes of El Salvador, which took 24 months to complete the process, which was initially set at three months.
He says, as with El Salvador, the people will carry out the exchange process and when two thirds of of the monetary base it converted it will be automatically dollarized. He says dollarization automatically becomes a stabilisation program.
Milei is also a big supporter of Israel, possibly to keep the country’s millions of evangelical Christians happy, and he has said he might convert to Judaism. Milei’s radical libertarianism would be an odd mix with Judaism and all its legalism. But without a central bank it’s obvious he knows who has got the dollars his country will need.
Before he was elected, Milei launched an attack on the Argentine Pope Francis, calling him a “Jesuit who promotes communism”, and even the “representative of the evil one [the Devil] on Earth”. Naughty, naughty Javier.
Someone must have had words with Milei because only days after his election win, he had what he called a “very friendly” phone call with the Pope, whom he addressed as “Your Holiness” and inviting him to visit Argentina in 2024.
That backdown has probably got a lot to do with internal politics because Milei’s Libertad Avanza (Freedom Advances) movement is only the third largest political force in Congress, which means he will face difficult negotiations with a bunch of politicians who are as socialist as any others.
While dumping a bunch of useless bureaucratic institutions that are forever bleeding the country’s finances, making the country open ground for dozens of multinational “service providers” from banks and road builders to water and energy suppliers will also be an acid test for Milei’s reforms.
For instance, Argentine electricity is heavily subsidized by the state to the point where it is up to 40 times cheaper for the consumer than Europe. Argentine’s could be in for a shock when the multinationals take over, but given his total rejection of climate change hysteria and dumping of the environment department, perhaps their current energy mix will see them through.
“I do not deny climate change. What I am saying is that there is a temperature cycle in the history of the Earth… Therefore, all those policies that blame humans for climate change are false,” Milei said during a presidential debate last month, that apparently sent shockwaves through “the global(ist) community”.
The BBC predictably commented: “Such apparent climate scepticism risked putting Mr Milei sharply out of tune with an international majority of governments and leaders who plan to gather at the COP28 climate conference in Dubai soon to seek urgent solutions to the problems of climate change and global warming.” Tut, tut.
Despite his crazy appearance with his retro-hairstyle and theatrics such as appearing on a platform after his election win revving up a chainsaw, Milei is an economist with strong views about what works and what doesn’t. Answers are certainly needed in a country that has long had to deal with rampant inflation and fiscal failure.
Milei’s predecessor, the left-wing Peronist President Alberto Fernández, had developed ties with Beijing and put the country on track to join Brics on January 1, 2024, along with Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. Brics is led by Russia and China and also includes Brazil, India, and South Africa. The group counteracts the dominance of the Anglo-American-EU globalists, who Milei wants to be strongly allied with.
Milei’s radical libertarian ideology has led him to say he doesn’t do deals with communists, which would therefore preclude him from trade deals with China or Brazil. But China has become a top market for Argentina’s soybean, meat and grains and that will continue.
China has also played a role propping up Argentina’s financial reserves with a currency swap deal, which is seen as significant support for a country already heavily indebted to the International Monetary Fund (IMF).
The BBC also noted that Milei received a personal letter of “congratulations and good wishes” from Chinese President Xi Jinping and Milei himself thanked Xi on social media. Milei’s Foreign Minister Diana Mondino also dismissed suggestions that commercial relations with China and Brazil would be ruptured.
So Milei, despite all his anti-socialist claims, will still be a player on the international trading stage, which is understandable, given that the country is endowed with very rich and abundant natural resources in agriculture and mining.
The new president will face some real opposition to his reforms from the entrenched political class, and how he deals with the woke global business corporations, the World Economic Forum and the UN, will be telling.