Argentina was once one of the world’s strongest countries and has always had bounds of potential. It is the second largest country by land mass in South America, has the third largest population, and has vast swaths of natural resources, including wheat and petroleum. Its name even hints at the country’s abundance of natural resources; Spanish colonists named the country Argentina because of its large silver deposits. In 1913, Argentina was one of the world’s largest economies, larger than those of Germany and France. Yet Argentina has experienced periods of economic crisis almost ceaselessly since the 1930s, triggered by an over-reliance on agricultural exports and excessive government spending. The new president of Argentina, Javier Milei, seeks to solve the continuous economic problem in his country by breaking from the status quo.
Milei’s approach to the economic crisis is to end the ‘orgy of public spending’ that he believes is at the heart of Argentina’s main problem, inflation. On the day of his inauguration, December 10th 2023, inflation was near 200% - a devastating figure. To put that into perspective, under Liz Truss, inflation reached 15% - a 40 year high in the UK – and that was regarded as a catastrophe. Milei seeks to fix inflation by cutting government spending. For instance, he plans to remove the government from education and healthcare, and he plans to remove the country’s central bank. To fully implement his libertarian economics, he wants to privatise state companies. Milei’s approach is revolutionary. In the recent past, such as under the government of Cristina Fernández de Kirchner, which was in power from 2007 to 2015, Argentines enjoyed extensive welfare programs. A world without such benefits is coming as a shock to Argentines; just this month there was a 24-hour general strike against these spending cuts.
Milei has been in office now for around 6 months. Initially, he gained much praise for his policies; perhaps most notably from Elon Musk, who predicted that ‘prosperity is ahead for Argentina’. Milei has also drawn comparisons to and received praise from Donald Trump. Yet it remains to be seen how far the Argentine people are willing to follow his ideas. Many are opposed to the spending cuts that take away institutions of national pride, such as their healthcare system. Others have taken to the streets, shouting that their country is ‘not for sale’ in protest to the free economy that Milei is seeking to implement. Milei has warned that the situation will get worse before it improves; and he was certainly right about the former. There has been an economic slump in the months after Milei’s inauguration. An estimated 50% of Argentines now live in poverty, compared to 38% in September, and the economy will shrink around 4% this year. Yet Milei argues that this is the price Argentina must pay to rescue itself from this crisis. And there are signs that the situation is improving. Inflation has gone down each month for the past three months.
There are still questions about how successful Milei can be. It is unclear how much suffering the Argentines are willing to endure in keeping with his plans. However, his approval rating remains astonishingly high at roughly 50%, which is remarkably close to that of 56% that got him elected, bearing in mind the pain Argentines have had to endure. He also needs more political support to ensure that he can push through the policies required to stimulate economic growth. For now, though, the signs are largely positive.
