Argentina has undergone drastic economic reforms since Javier Milei was elected to office on 10 December 2023. His presidency has been met with both commendations and criticisms following the drastic measures he has undertaken to restructure the economic landscape of Argentina along with its social and political prospects. Nevertheless, because of the intrigue surrounding the Milei administration, the specific economic views and economic policies of Javier Milei have become one of the more popular topics in contemporary economic and political discourses.
Milei Economics: Understanding the Economic Views of Javier Milei and the Economic Policies Under the Milei Administration
Economic Views of Javier Milei: Background in Economics and Leanings Toward Economic Principles and Schools of Thought in Economics
Education Background and Economics Career
Milei became interested in economics upon witnessing the unsettling impact of hyperinflation in Argentina following the collapse of the exchange rates between the Argentine peso and the United States dollar in the early 1980s. He pursued and obtained a Licentiate Degree in Economics from the University of Belgrano and worked as an intern at the Central Bank of Argentina. The aspiring economist continued his studies and completed two Master of Economics degrees at the Institute of Economic and Social Development and Torcuato Di Tella University.
He immersed himself in Keynesian economics while completing his initial economics degree at the University of Belgrano. This school of thought in economics was named after English economist and philosopher John Maynard Keynes. However, while pursuing post-graduate degrees at the Institute of Economic and Social Development and Torcuato Di Tella University, he was becoming doubtful of the merits of Keynesian economics. This was driven by his exposure to the libertarian thought of American economist Murray Rothbard.
Milei began a career in the private sector as an economist after completing his educational pursuits. One of his first work was with HSBC Argentina. He later became the head economist at the private pension fund Máxima AFJP, then later at the financial advising firm Estudio Broda, and further at the multinational holding company Corporación América where he worked for 15 years. Milei also worked as a consultant at the International Centre for Settlement of Investment Disputes and later led the division of Economic Studies at the national think tank Fundación Acordar.
The growing credentials of Milei afforded him the authority to become a university professor, a media resource person, and a book author. He taught macroeconomics, economics of growth, microeconomics, and mathematics for economists at various universities in Argentina and abroad for over 20 years. His regular media appearances made him the most interviewed economist in the country. Mile authored and co-authored books and several journal articles about macroeconomic principles, liberal economic theories, and Argentine political economy.
Adherence to Economic Principles and Schools
Remember that Milei was exposed to the works of Rothbard while completing his post-graduate degrees. Rothbard is known for introducing the concept of anarcho-capitalism. This political-economy theory argues for the voluntary exchange of goods and services in a landscape that is regulated by the market without government intervention. Milei further explored related concepts from economists. These included Austrian-born British classical liberal economist F. A. Hayek and economist Ludwig von Mises of the Austrian school of economic thought.
The emerging Argentine economist developed a strong belief that government interventions harm the economic success of a country. Liberalism is at his core. His growing public exposure through interviews and debates beginning in 2010 provided him with opportunities to express further his economic views. Some considered him antipolitical or disruptive because of his use of insults and foul language. Nevertheless, during his presidential bid and throughout his presidential tenure, Milei has claimed that he is a philosophical anarcho-capitalist and minarchist.
It is important to reiterate the fact that anarcho-capitalism advocates for stateless societies where private agencies oversee the property regime. Some regard this as the purest form of capitalism and the free market. Minarchism, on the other hand, is a form of government that is limited and minimal with functions dependent on libertarian theory. Adherence to these ideologies makes Milei a pro-capitalism classical liberal economist at his core with a broader libertarian-leaning that applies not only to his economic views but also his sociopolitical principles.
Milei has also been extremely critical of socialism and communism because of his liberal core and specific libertarian leanings. He argued in his TEDx Talk presentation in 2019 that socialism embodies envy, resentment, and coercion, while capitalism and liberalism promote and protect limitless respect for the undertakings of individuals. Furthermore, in an interview with the leading Argentine conservative newspaper La Nación, he asserted that liberalism and communism are the only economic systems, and that socialism is a model of poverty and a failure.
Economic Policies of Javier MiIei: Notable Economic Reforms and Programs of the Milei Administration and Impacts on the Argentine Economy
Reducing Government Size and Spending
The Milei administration established the Ministry of Deregulation and State Transformation on 5 July 2024. It was part of the plans and reforms under the flagship Lay Bases or Law of Bases and Starting Points for the Freedom of Argentines that passed the Argentine Senate on 12 June 2024 and got approval from the Argentine Chamber of Deputies on 27 June 2024. One of its provisions grants the Federal Executive the power to reorganize the executive government along with its state department and agencies, state-owned companies, and public trust funds.
Hence, under the new ministry, Javier Milei has started one of his economic reforms based on the libertarian and minarchist agenda of Milei. Part of the task of this executive government agency is to reduce government size and spending. This endeavor aims to transform and simplify the management of the state by increasing the efficiency and effectiveness of departments and agencies involved in public administration, privatization of certain state-run activities, and improving policies related to public employment and reducing government workforce.
Milei has several reasons for wanting to reduce the size of the government and its spending habits. The first is that a large government hinders economic freedom and growth because it often leads to excessive regulations, taxes, and bureaucracy. It also is inefficient and drains national resources while being prone to corruption. Another reason is to manage the high levels of public debt and fiscal deficits of Argentina by reducing government spending. Milei aims to lower taxes to promote consumption and investment without affecting the core functions of the government.
Incentive Regime For Large Investments
Ley Bases also has provisions for the creation of a new incentive regime for large investments to encourage national and foreign investment undertakings in certain sectors. These sectors include the agribusiness, infrastructure, forestry, mining, oil and gas, energy, and technology sectors. A qualified firm has to develop and pursue a project of at least USD 200 million. The incentives include direct and indirect tax, customs, and foreign exchange benefits. The goal is to generate and promote conditions that are predictable and stable for large investments in target sectors.
The specific tax benefits include certain tax exemptions, reductions in corporate income tax rates, and other fiscal benefits designed to lower the tax burden on large investments. The specific custom benefits include reductions in import duties or exemptions for equipment and materials necessary for project development. Furthermore, to address the common concern about the impact of the volatile currency regime of Argentina, the foreign exchange benefits facilitate the free movement of capital, reduce exchange controls, and ensure stability for foreign investors.
It is worth noting that the incentive regime promotes economic freedom by reducing tax burdens and easing customs regulations. This is aligned with the libertarian economic view of Javier Milei. He is essentially facilitating investments by creating conditions that are less restrictive. The regime can also be understood under the lens of supply-side economics. Specifically, by providing tax, custom, and foreign exchange benefits, it lowers the barriers for firms to invest in an attempt to expand the productive capacity of the economy and contribute to economic growth.
Radical Economic Deregulation Proposals
A sweeping economic reform through economic deregulation remains the central economic policy of Javier Milei. The reduction of government size and the new incentive regime to incentivize or encourage large investment activities are part of this policy. He also has several proposals that have been put forward during his campaign and at the beginning of his term. One of which is a plan to review and either remove or change regulations related to the Argentine economy. There were more than 300 regulations that had already been set aside at the start of his term.
He wants to make labor laws less restrictive and the labor market more flexible. The Argentine president believes that the current labor regulations are too rigid and dissuade firms from hiring and creating employment. His administration is also working on free trade agreements and reducing tariffs and other trade barriers to make the economy more open to international trade. Another controversial economic policy of Milei is the proposed abolition of the central bank and the dollarization of the currency to prevent manipulation via monetary policy.
The aforementioned underlines the liberal and libertarian economic views of Milei that are further grounded on anarcho-capitalism and laissez-faire capitalism. Supporters argue that his ongoing and proposed economic deregulation policies would address the persistent issues of hyperinflation, debt crises, and fiscal imprudence. The entire pursuit demonstrates a radical shift from the traditional reliance of Argentina on state intervention and is part of the greater libertarian vision for a smaller government, free markets, and individual economic freedom.
FURTHER READINGS AND REFERENCES
- La Nación. 2020. Javier Milei, con Viviana Canosa: “Detesto a Los Zurdos Porque Odian La Vida.” La Nación. Available online
- Milei, Javier. 2019. “La Estruendosa Superioridad Del Capitalismo.” TEDx Talks. Available on YouTube
- Sandleris, G. 2024. Argentina and Milei: Is This Time Different? Bologna Institute for Research Policy. John Hopkins School for Advanced International Studies. Available online
- The Economist. 2024. Javier Milei Has Turned Argentina Into a Libertarian Laboratory. The Economist. Available online
Photo Credit: Argentine Senate/Inauguration of Javier Milei/2023/Public Domain/Source