Freedom (and poverty) in Argentina: Milei’s 100 frenetic days in power and an unprecedented economic experiment

Javier Milei came to power last December, in an Argentina worn down by successive crises. With the promise of ending the slow decline of the South American country and turning it into a world power again, the president announced that he was going to deregulate all sectors of the economy, privatize public companies, lower taxes, replace the peso with the dollar and shutter the Central Bank. This proposal involves dynamiting the foundations of the bruised Argentine welfare state and replacing it with an economic system that has few regulations and much more market freedom.

In the three months since he became president, Milei has carried out a draconian fiscal adjustment. He has begun to liberalize the economy via executive decree, implementing more than 300 measures. The rental market is now fully in the hands of the landlords: there are no more controls imposed by the government. Private healthcare companies can set the price they wish for their clients, while several industrial and commercial regulations have been repealed. A first step has also been taken towards the privatization of state-owned companies.

Milei’s economic policies have pulled the Argentine people one step backwards from where they were before he assumed office. Inflation now exceeds that of Venezuela and is the highest in the world (276% year-over-year), while the poverty rate is closing in on 60%. Unemployment is also on the rise.

Milei blames the deterioration of the economy on his predecessors and is maintaining a fixed course towards an irreversible transformation. Along the way, he has encountered two obstacles: the National Congress — which has prevented him from gutting the state apparatus — and the justice system, which has put his labor reforms (made via executive decree) on hold.

“If anyone thought that so many decades of cheap and impoverishing populism could be resolved in 90 days, they were wrong,” presidential spokesman Manuel Adorni said on Thursday, March 14. “Our success is that expectations have changed… [the population is beginning] to understand that we’ve avoided the worst, that we’ve avoided hyperinflation and that we’re [going through difficult months], by virtue of correcting a lot of inequalities and distortions,” he added. Adorni refrained from predicting when the economic recovery will actually begin.

Discontent is rocking the streets, with calls for strikes and protests every week. But the president refuses to look for another course of action and is betting that his opponents will eventually step aside and give him a clear path to impose his agenda. So far, his dogmatic character has prevailed over the pragmatism expected of a head of state who has a weak legislative minority. In the National Congress, his far-right La Libertad Avanza (“Liberty Advances”) coalition only has 38 of 257 deputies and seven of 72 senators.

The Argentine president, a 53-year-old economist and TV panelist by profession, defines himself as a libertarian. He is a follower of the Austrian School, a school of thought founded by Carl Menger at the end of the 19th century, which places individual freedom as the basis of progress and maintains that the state should stay away from the economic decisions of individuals. “The state is a criminal organization,” Milei affirmed on March 1, in his opening speech to the 2024-2025 legislative session. This is the same message that made him popular as a talk show guest and on which he based his successful electoral campaign when he made the leap to politics. The difference is that, since December 10 of 2023, Milei is the leading representative of the very institutions he’s attacking.

A radical doctrine

The president admires the economist Murray Rothbard, of the Austrian School, to the point of naming one of his four dogs after him. The term “anarcho-capitalism” is attributed to Rothbard, who defended the total abolition of the state in favor of individual sovereignty.

Milei considers himself to be an anarcho-capitalist at heart, but a minarchist in practice: that is, he believes that state functions should be limited to justice and security. This explains why, some time ago, he was in favor of the sale of organs — and even the sale of children — and no restrictions on personal firearms. He dropped these ideas in the final months of the presidential campaign.

Milei’s doctrine is radical for any country — “I’m the first libertarian president in the world,” he likes to boast — but much more so in Argentina, where the state is one of the largest employers and the economy receives massive public investment. The resounding victory of a candidate who brandished a chainsaw as a symbol of cutting public spending was possible due to widespread fatigue with the traditional political class, after 12 years of economic stagnation and Argentines’ loss of purchasing power. The purchasing power of salaries was reduced by 25% between December of 2017 and November of 2023. “There’s no money,” Milei lamented, in his first speech as president… and no one came out to contradict him. He then announced a fiscal adjustment plan, consisting of spending cuts equivalent to 5% of GDP over the course of 2024.

The first cut was symbolic: the number of ministries shrank from 19 to nine. He then ordered the freezing of almost all public works and devalued the peso by 54%, to bring the value of the official price — regulated by the state — closer to that of the black market. The gap between the two, which was greater than 100%, is now around 20%. The measure was applauded by the markets and by the export sector, Argentina’s economic engine, but it contributed to the prices of goods and services soaring, with incomes unable to keep up. In the first two months of Milei’s administration, salaries lost 23% purchasing power… almost the same as in the previous six years combined. And the forecasts aren’t encouraging, either: GDP fell by 1.6% in 2023, while a decline of 2.8% is expected this year.

The adjustment has included a 64% reduction in the multi-billion-dollar subsidies with which the previous center-left governments kept public transportation and various utilities — such as electricity, gas and water — at relatively low prices. The value of bus tickets in Buenos Aires has multiplied by five since Milei assumed the presidency, up to the current 270 pesos (about $0.30). It’s a very low price compared to other countries in the region, but it represents a new blow to the depleted pockets of Argentines, especially for workers who make more than one trip a day. Electricity, gas and water bills have also become more expensive and will continue to rise.

Runaway inflation has been used by the new government to meet its objectives. Milei’s administration has frozen many social benefits in order to obtain large budgetary savings. This has particularly affected retired Argentines: the minimum pension is now 134,000 pesos (about $130) a month, a figure that is below the poverty line, which is 193,000 pesos for an adult ($185). More and more elderly Argentines cannot afford medications, which have increased in price by more than 300% over the past year.

“Milei is governing for the market and turning his back on society,” warns economist Juan Manuel Telechea. Argentine bonds are rising, the country’s risk rating has dropped to its lowest level in nine months, while the Central Bank has already accumulated more than $9 billion in reserves. Argentina registered a fiscal surplus in January for the first time since 2012. But, according to Telechea, this positive data has created “a false sense of success.” This expert believes that it’s unsustainable — “how much more are we going to be able to cut social programs and pensions?” — and hides the fact that a great social crisis is brewing beneath the surface.

The middle class is dealing with declining incomes by reducing all possible expenses, as shown by the collapse in consumption. This past February, according to local chambers of commerce, sales in small- and medium-sized businesses fell 25%, while the number of new car license plates fell by 20%, according to the Argentine Dealers Association.

Families who still cannot make ends meet have begun to exchange the U.S. dollars they’ve saved up. “Almost everyone comes to sell dollars. Nobody buys,” says the owner of a currency trading business in the center of Buenos Aires. The exchange rate at which these transactions are made isn’t the official one (less than 900 pesos per dollar) but rather the market rate: one unit of the U.S. currency was sold in the middle of last week at around 1,085 pesos and was bought at 1,035.

The situation is critical for the poorest citizens. Although Argentina is one of the largest food exporters in the world, among its 46 million inhabitants, there are almost five million who suffer from hunger. The income of one in every 10 households is insufficient to purchase essential groceries, which have become 300% more expensive in the last year, with a cost similar to that of Spain, a high-income country. The price of some basic products such as milk is even higher: a liter of whole milk from a supermarket chain costs about $1.30, more expensive than in many European countries. Salaries, on the other hand, are much lower: the monthly minimum wage in Argentina is the equivalent of around $215.

In 2024, attendance at free community kitchens has reached levels similar to those recorded during the peak of the pandemic in 2020. These meal-providers cannot cope: Milei has suspended the delivery of supplies and has ordered a review of this social assistance model. These kitchens are currently dependent on donations and support from municipal and provincial governments.

The president attributes the social emergency to past policies. “The last 20 years have been an economic disaster, an orgy of public spending, uncontrolled [spending] that resulted in the worst inheritance that any government in Argentine history has ever received,” he told legislators earlier this month. For economic historian Pablo Gerchunoff, Milei wants to return to the conservative bonanza of 1910… a utopian desire. He compares this to the rise of the populist Peronist model in the 1940s, which saw the government of President Juan Perón greatly increase the role of the state in the economy. “Two anachronisms in competition,” Gerchunoff recently wrote in an opinion column.

Since Argentina’s return to democracy in 1983, there has been one president who has escaped Milei’s wrath: Carlos Menem, who governed from 1989 until 1999. Argentina suffered from hyperinflation at the beginning of his administration, but he later stabilized prices with the convertibility law, which pegged the value of the peso to that of the dollar. He removed restrictions on imports and privatized almost all public companies, including the state oil company YPF. The convertibility model began to break down in 1994, but was maintained until 2001, when it blew up amidst the worst economic and social crisis in the country’s recent history.

To get out of that crisis, Argentina benefited from high international grain prices. That tailwind has ceased, but there’s still good news for Milei: the country has recovered from last year’s historic drought. It’s expected that grain exports will bring in at least $15 billion more this year than in 2023. Milei’s administration will also benefit from the production of fossil fuels from the Vaca Muerta oil field, which is expected to contribute to an energy trade surplus of $3 billion in 2024.

Dollarization as a way out

Milei wants to go further than Menem. He has promised to adopt the U.S. dollar as the national currency. Economists of different currents consider dollarization to be a terrible idea, but the Argentine president hasn’t taken it off the table. Segments of the citizenry also support the proposal. “The reasons that experts give for opposing [dollarization] are technical, but the discussion on the street is to lower inflation,” says sociologist Mariana Luzzi, co-author of the book The Dollar: How the US Dollar Became a Popular Currency in Argentina (2023).

Luzzi affirms that dollarization has the halo of a magical solution for those who are tired of the peso losing value day by day. She believes that Milei’s objective isn’t so much to solve inflation (there are a variety of other tools available), but rather to clip the wings of a state that he considers to be an enemy. “Dollarization takes the power away from the state to issue a currency (the peso) and define monetary policy. Since it’s an easy policy to implement but a difficult one to abandon, it ensures that no other government will be able to issue currency again. It means taking power away and shrinking [the role of the state] forever,” she notes.

Outside of Argentina, the closest reference to the model that Milei wants to implement is what was done by the so-called “Chicago Boys” during the dictatorship of Augusto Pinochet in Chile (1973-1990). This group of young Chilean economists — who studied at the University of Chicago — carried out a profound tax and labor reform, deregulated the economy, opened the country’s doors to imports and privatized strategic public companies.

The economist Milton Friedman — idolized by neoliberals — coined the term “Chilean miracle” to refer to the work of his disciples. But there are figures that question this: during the Pinochet regime, poverty almost doubled, reaching 39% of the population by 1990. Unemployment grew and a large part of Chilean industry was destroyed by external competition. And, in the middle of the regime, the country was hit by the severe economic crisis of 1982.

“It was a miracle for the richest 10% of the country,” says Chilean historian Francisco Vidal, the former minister of defense under the first presidency of Michelle Bachelet (2006-2010). Vidal sees many parallels between Milei and the Chicago Boys, but also a big difference: “Milei wants to do the same thing, but he’s operating within a democracy. Pinochet closed the National Congress in one night, bombarded the popular media and crushed the political and social movements that opposed him.”

In Argentina, the National Congress put a stop to Milei this past February, when he attempted to pass an omnibus bill that would have reformed the state. The official negotiators agreed to trim almost half of the 664 proposed articles, which included the delegation of legislative powers to the president for two years (with the possibility of extension), the reform of the political and tax system, privatizations, restrictions on the right to strike and greater control over protests. The dialogue collapsed because the parliamentarians asked for more resources for the provinces, but Milei refused. When he saw that the opposition was voting against some key articles, the president chose to withdraw the bill and vented his fury on social media, declaring his opponents to be “traitors” and “extortionists.”

A month later, Milei, once again, is attempting to build a bridge of dialogue with the opposition. He needs Congress to formally pass his economic reforms, as requested by the International Monetary Fund (IMF). Instead of negotiating with the parliamentary blocs, he’s now addressing the provincial governors: he’s offering them more resources in exchange for their region’s legislators approving his rewritten omnibus bill. He has also asked the governors to sign a 10-point “social pact” by May, which essentially consists of free market commandments.

The new offer, however, includes a threat: “We have no ambition for power: we thirst for change. If what they seek is conflict, conflict is what they’ll get.” The negotiation will take place both in the hall of power and on the streets. The unions called a general strike just 45 days after the new government took power and, in recent weeks, teachers, medical personnel and railway workers have gone on strike. Milei is asking the public for “patience and trust.” Opponents are betting that the people’s patience will run out.

A society divided between the “political class” and the “decent citizens”

One of the causes of Argentina’s decline has been its social and political polarization. For decades, the South American country has swung like a pendulum between two antagonistic governing models… and corruption runs rampant between these cracks. Protectionist governments are succeeded by administrations that defend free markets; some approve measures to sustain a welfare state that maintains free public education and healthcare, while others make cuts because they consider this system to be inefficient. However, Milei’s election has taken that oscillation to an extreme never before seen in the last 40 years of democracy.

The libertarian president has broken the classic division between Peronists and anti-Peronists, replacing it with an even deeper one: that of the “decent Argentines” against “the caste” (the political class), the latter group consisting of politicians, well-connected businesspeople, journalists and union members who are reluctant to give up their privileges.

“Last night, the [political class] celebrated. Today, decent Argentines will suffer the negative effects of [this group’s] excesses and passion for living off of other people’s labor,” Milei wrote on his Twitter account, following his legislative defeat in February.

According to Italian historian Loris Zanatta, who specializes in Latin American populism, this Manichaean vision of the world closely links Milei to other populist leaders. “If we understand populism as a policy of economic demagoguery, then the Kirchners (the husband and wife who governed Argentina from 2003 until 2015) were populists: not Milei, who wants to reduce public spending by 5% of GDP. But populism is, essentially, a religious vision of the world that divides it between a pure people and a corrupt elite. In that sense, Milei is a hyperpopulist,” Zanatta notes. This professor from the University of Bologna and a frequent visitor to Argentina warns that Milei’s messianic language carries an implicit risk of authoritarianism: “All populists think that their supporters — even if it’s only part of their population — are the total population. [Hence], this gives them the right to impose their will.”

Milei is relying on the 56% of Argentines who voted for him to demand that Congress approve his new omnibus bill. But that support is volatile: he began his administration with 58% approval and 42% disapproval, according to an Opinaia survey based on 1,200 online interviews. But by the end of February, his approval rating had fallen by six points. The snapshot is now of an Argentina that is almost divided in two.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition