Argentina’s Trump Card?

10 May 2024
Argentina’s Trump Card? - Featured image

All eyes are on Argentina since the election of an eccentric libertarian as the beleaguered nation’s President, writes economics consultant Andrew Russell.

For libertarians, endlessly frustrated at how rarely people of their ideological inclination actually get elected, Javier Milei’s recent victory in Argentina’s Presidential election has given them a chance to finally see what having one of their own with substantial political power might be like. For the rest of us, who may not be card-carrying libertarian pundits, what are we to make of this chainsaw-wielding seemingly radical figure? Who is Javier Milei? What kind of libertarian is he? What has been made of him so far? And crucially, what are his real-world chances of combatting the ‘new socialism’ that Milei has deemed the biggest threat to the West?

A 53-year-old economics professor, author, and political commentator, Milei has described himself as a Hayekian ‘in the short term’ but is noted for advocating free-market anarchism and can be more accurately understood as a Rothbardian libertarian. Rothbardians are followers of the economist Murray Rothbard, the most famous theorist of anarcho-capitalism or Austrian School free-market anarchism, and argue that the State’s core functions of defence, courts, and law enforcement could be replaced by private security and arbitration agencies. In this way Rothbardians are distinct from anti-capitalist anarchists, in that they reject the Labour Theory of Value and, consequently, do not believe profit is inherently expropriative. Hayekians are followers of the economist Friedrich Hayek, who was not an anarchist and took a more conventional (yet still radical relative to real-world governments) minimal-government position. So far, the policy reforms Milei is seeking are substantially more modest than what a Hayekian would desire, and far from what a Rothbardian free-market anarchist would ultimately consider ideal. However, the fact such a radical figure was elected Argentina’s President is remarkable in itself, and when taken with his messy hair, penchant for dressing up as a superhero named ‘Captain Ancap’ (short for ‘anarcho-capitalist’), and proclamations of his enthusiasm for threesomes, one is somewhat taken aback when outlets in the liar press insist on referring to him as an “extreme social conservative”.

Indeed, Milei’s anarcho-capitalism, while radical, has been somewhat sidelined and confused by his unorthodox character, and across the board, and a bit like the man himself, the reactions to Javier Milei’s ascension to the Argentine Presidency have been theatrical. They have ranged from hysterical conniptions and prophecies of the apocalypse to joyous celebrations and loud chants of ‘¡Afuera!’, which is Spanish for ‘Out!’ (in the sense of ‘cast out’ or ‘get rid of’) and used in this context to refer to Milei’s theatrical slashing of ministerial bureaucracy on his first day in office. Unsurprisingly, most of these reactions map neatly onto left-right political positioning, with persons-on-the-left broadcasting their psychological meltdowns on social media and persons-on-the-right triumphantly cheering that Milei will Make Argentina Great Again.

Politics is not just about policy but also about personality.

In a world of mass media, broadcasted campaigns, and voters who can be moved by charisma just as much as tax cuts, politics is not just about policy but also about personality. Milei’s personality, at least on the campaign trail, has been consistently passionate, bombastic, and iconoclastic. Despite being from a nation where the majority are Roman Catholics, Pope Francis is one of Milei’s favourite targets. Milei has described his fellow Argentine as a “son of a bitch”, a “filthy leftist”, a “communist turd”, and an “imbecile”, alongside further criticisms that are probably too harshly worded to print in the IPA Review.

Predictably, Milei’s bluntness and bombast have invited comparisons to Trump, who unfortunately functions as the elephant in the room in discussions such as these. Trump is no one’s idea of a free-market anarchist and, consequently, it can be fairly argued that the only valid comparisons are on the basis of style. But the grievances aired by Milei often echo those aired by The Donald and other ‘right-wing nationalist populists’, and while his response to these issues identified by other prominent figures on the right is distinctively libertarian, Milei’s popularity—indeed his election as President of Argentina—speaks to just how loud the pushback against the ‘status quo’ has become.

Like Trump in the US, Nigel Farage in the UK, Giorgia Meloni in Italy, and Pauline Hanson in Australia, Milei has been outspoken on issues of immigration, climate change policy, the public service, education, and the mainstream media. That is why it is useful to summarise these larger, more general complaints about the state of the West, before looking at the Argentine context and Milei’s policy proposals.

The first charge that Milei and other ‘right-wing populists’ level at the establishment is that immigration policy is being used as a kind of gerrymandering whereby the politicians of the centre-left import constituents that will vote for them, as opposed to immigration policy based on the interests of the nation as a whole. Climate change policy is likewise called out for what it is really doing: degrading living standards and social mobility. In both cases reasonable criticism of policy is silenced, with any dissenters from the orthodoxy being deemed ‘racists’ or ‘science deniers’.

When we turn to the question of those who enforce the orthodoxy—the civil or public service and the educated elite—the former are revealed as a self-interested special interest group that has become increasingly metropolitan, authoritarian, and partisan-left, while the latter are accused of turning credentialism into the new classism. Further, the vast majority of the mainstream press has become a megaphone for that same trendy woke or social justice orthodoxy and is complicit in the active persecution of dissenters. Together, these charges combine and reveal that society is becoming further dominated by an increasingly unaccountable woke credentialist bureaucrat-academic-managerial class that exists primarily due to government largesse yet believes itself to be morally and intellectually superior to those it governs. Milei gives the loudest voice to this charge.

Milei’s populism and his libertarianism go hand-in-hand.

As such, it is quite appropriate that Milei was often seen brandishing a chainsaw at campaign rallies. His populism and his libertarianism go hand-in-hand. The socioeconomic elite of Argentina is ultimately a set of the State’s cronies and clients, and this elite’s wealth and power comes at the expense of those who are not part of it. Peronism—which came into power championing the poor and claiming to desire a more equal society—has in fact further exacerbated and entrenched inequality and uses the poor as nothing more than human shields against its critics.

This strategy worked quite well. Argentina became greatly impoverished under Peronist rule and endured astronomically high levels of inflation for decades. Finally, the people of Argentina realised Peronism gave control of their society to an extractive elite and elected Milei to dismantle it. However, we cannot expect this elite to quietly accept the people’s judgment. Milei faces an uphill climb steeper than that which faces an intoxicated karaoke performer attempting to sing Don’t Cry for Me Argentina.

This screenshot of a video captures the memorable meeting of Donald Trump and Javier Milei on 24 February 2024 during the Conservative Political Action Conference near Washington.

One does not even have to look at the leftists to see that Milei faces constraints. Milei may be President, but (as is normal within Presidential systems) his powers are limited. The coalition of parties which he heads is in minority government. In addition, not every one of the parties within this coalition is a libertarian party, and it is almost certain that Milei will have to keep a reasonably large cohort of socially conservative Catholics happy in order to retain his position. This is not impossible, but historically speaking attempts at ‘fusionism’ (a political coalition between religious conservatives and libertarians, where libertarian policies are justified as effective means to the ends of religious conservatives) have usually been racked with rancour.

The US experience is quite instructive, beginning with William F Buckley Jr excommunicating the (Ayn) Randians and ending with the George W Bush administration—during which the American right was dominated by the concerns of ‘values voters’ and ‘people of faith’ (primarily evangelicals). The resultant damage to Christianity’s reputation and moral authority still hasn’t been repaired over a decade later: people still remember in graphic detail the Christian Right’s authoritarianism, hatred of sexual minorities, attempts to push religion in public school biology classes, and enthusiasm for war in the Middle East as a way of fulfilling Biblical prophecy.

There is no reason to believe fusionism in Argentina will not face the same problems it did in the US. Indeed, Argentina’s Roman Catholicism may intensify these conflicts. Pope Francis’s own leftist views on economics are well-known, and Papal encyclicals ruthlessly criticising free markets are not hard to find (see Pope Paul VI’s Populorum Progressio). Libertarian Catholics do exist, but the blunt reality is that the Roman Catholic Church is a centralised and hierarchical organisation that claims for itself the authority to dictate what its members must believe about politics. If the many Peronist sympathisers within the Catholic ecclesiarchy (including the Pope) weaponise (or further weaponise) this authority against Milei’s agenda, the impact on Milei’s coalition could be catastrophic.

Bureaucrats are people and, consequently, can be presumed to be self-interested.

Internal difficulties notwithstanding, Milei’s largest problems are going to be the special interest groups he seeks to defeat. Perhaps the most obvious is the bureaucracy, also known as the ‘deep state’ or the ‘administrative state’.

The relevant economic analysis comes from Public Choice Theory, and in particular the work of American economist and long-time Cato Institute chairman William Niskanen (1933-2011): bureaucrats are people and, consequently, can be presumed to be self-interested. Like everyone else, they want their careers to be more lucrative, their job security to be increased, their work life to be less strenuous, and their workplaces to have higher amenity levels. Consequently, they act in order to maximise their budget. This includes their voting behaviour—the incentive is for them to vote for the side of politics that is most enthusiastic about bureaucracy (typically the establishment left, who consequently have an electoral incentive to create pleasant and lucrative public service positions as a form of buying votes). The incentives also potentially serve as a systemic cognitive distortion. After all, as American writer and activist Upton Sinclair (1878-1968) said, “It is difficult to get a man to understand something when his salary depends on his not understanding it”.

It is therefore unsurprising that bureaucrats are often hostile towards any ideology or policy agenda that threatens to shrink, disempower, or streamline bureaucracy. Again, the US experience is instructive: American public employees and their unions donate overwhelmingly more to the Democratic than to the Republican party. In addition, during the previous Republican administration, there were multiple attempts by several bureaucracies to resist or subvert that administration’s agenda. There is no reason to think the Argentine bureaucracy would not do the same, given that the incentive structure remains constant. Milei may not be Trump, but both support substantial shrinkage of bureaucracy and operate from an ideological viewpoint that sees bureaucrats as, for the most part, members of a parasite class rather than a productive one.

The other faction of this parasite class which Milei regularly rails against is Argentina’s private-sector cronies. Indeed, the scale of such entrenched cronyism within Argentina should be quite remarkable to anyone who adheres to the naive social-democratic view of powerful regulatory bureaucracy as a check against the power of big business. This naive viewpoint implies a trade-off between bureaucracy and cronyism, but the reality on the ground in Argentina is that powerful State-favoured corporations and powerful regulatory bureaucracy grow hand-in-hand.

To someone familiar with the corpus of Public Choice Theory, however, the symbiosis between big government and big business is not a surprise. Heavy-handed regulation tends to operate like a regressive tax on small businesses: large firms can afford the compliance costs but smaller firms cannot, and thus larger firms benefit from reduced competition. Additionally, the more power a regulatory bureaucracy has, the larger the incentive to capture it, and such capture is easier for larger firms to achieve.

Finally, from the perspective of the government, a monopoly or oligopoly may be much easier to regulate than an open-entry market with many participants, and any cultivated monopoly or oligopoly rents can be captured through taxation. The result is a convergence of the interests of, and the progressive erasure of the line between, political and corporate elites.

It is not unreasonable to see Milei as a David staring down a Goliath.

Milei may be the President but in the face of such ingrained enemies, it is not unreasonable to see him as a David staring down a Goliath. Almost immediately upon assuming office, Milei shrank the number of civil service positions by at least 5,000 (some reports say the number is 7,000) through non-renewal of employment contracts and reduced the number of ministries by half. However, there is only so much he can do by executive action and Argentina’s legislature already has made things difficult.

Against the backdrop of strident and vigorous protests in the streets of Buenos Aires, Milei’s first package of proposed reforms was debated in the lower house and, in order to win over centrist legislators, had approximately two-thirds of its provisions removed. On 7 February 2024, Milei’s La Libertad Avanza party withdrew the remnants of the reform package and sent it back to committee.

This disappointment notwithstanding, it must be remembered that we are still in the earliest days of the Milei administration. We do not yet know how, or how well, he will negotiate with and extract concessions from his opposition. The messy process of crafting politically acceptable legislation is, as Otto von Bismarck memorably characterised it, an exercise in “the art of the possible… the art of the next best”. As such, disappointment should be expected, but thankfully disappointment does not preclude improvement, and if any nation is in desperate need of improvement it is Argentina. What was once one of the world’s most prosperous societies is now, in the aftermath of Peronism, afflicted with 40 per cent poverty rates, 200 per cent annual inflation rates, and the unenviable title of the IMF’s greatest debtor. This can only be fairly described as a humanitarian crisis, and consequently the policy response is a matter of life and death.

Let us not mince words: Javier Milei’s presidency is one with high stakes for advocates of free market economics. If his policy reforms produce negative consequences, these consequences will be used as evidence that free market economics does not work. If his policy reforms are consistently and persistently rejected by Argentina’s courts or legislators or, in a future election, citizens, this will be used as evidence that free market economics is electorally unviable. Anything less than a resounding, undeniable success will be cited as evidence that anarcho-capitalism does not work, despite the facts that Milei is not abolishing the State and the kind of person looking forward to crowing over Milei’s failure typically claims “real socialism has never been tried”.

Even if Milei’s policies do result in substantial net benefits, those members of the discourse-shaping classes who depend on public largesse (such as publicly employed or funded journalists, pundits, scholars, and artists) are almost certainly going to attempt to obfuscate or marginalise said benefits (and to be fair, Milei’s policies may indeed impose substantial material costs upon them). In addition, in the highly unlikely event Milei’s socially conservative coalition partners push the kind of social policies that characterised the George W Bush-era Religious Right, free market advocates will have to work harder to separate their economic vision from a social agenda that is deeply reviled by supermajorities of those under 60 years of age. That said, should Milei succeed, his success will be greatly inspirational to free market advocates, including those in Australia.

Despite having been an outspoken critic of Pope Francis, Argentine President Milei’s meeting with Pope Francis in Vatican City on 12 February 2024 appeared to be cordial.
Photo: Vatican Media

Predicting the short-to-medium-term future is an imprecise endeavour at best (and economists generally have a pretty poor record at it), but what is certain is that Milei will face deeply determined opposition, that the maximum degree of liberalisation he could theoretically deliver will still fall short of a Hayekian standard, and that many eyes will be watching the Milei administration very closely.

Let us hope for the best, for lives are at stake and Lady Liberty is on trial.

Dr Andrew Russell is an economist, philosopher, and musician based in Brisbane. He specialises in Austrian, evolutionary, institutional, and public choice economics. His PhD at RMIT in Melbourne was a dissertation on the economics of casino gambling.

This article from the Autumn 2024 edition of the IPA Review is written by economics consultant Andrew Russell.

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