Javier Milei’s troubled path to the Argentine presidency

Since taking office as president of Argentina, Javier Milei, the ultraliberal who identifies himself as an anarcho-capitalist, has been accumulating successive defeats in his effort to rewrite the operating rules of the Argentine economy and society. With a reduced bench of deputies from his own party and depending on the support of conservative parties that during his electoral campaign he accused of being the scum of Argentine politics, Milei’s government has not been able to overcome the strong opposition of the Argentine Parliament to carry out its ultraliberal ideas.

It would be a mistake, however, to say in advance that his government will be a complete failure. Milei is playing into the hands of big international financial capital and that is why he has counted on the goodwill of international banks and the International Monetary Fund. Milei’s biggest challenge is to reduce Argentine inflation to levels that allow the economy to function normally. If you achieve this, you have a great chance of being successful in your government.

Inflation is a pushing game in which no one wants to be left holding the bag. If wages rise, business owners and owners increase prices and rents so as not to reduce their profits and income. Faced with rising prices and rents, workers, in turn, demand new salary increases or the government begins to issue currency to support them through social programs, thus creating an inflationary spiral in which the sky is the limit. . This is what is called inertial inflation.

The only way to interrupt this inertial movement of inflation is to find a “payer of last resort” who will take the trouble and, without fussing or mooing, agree to pay the bill. In Brazil, for example, the URV (Value Reference Unit) trick, in 1994, in the transition from Cruzeiro Real to Real, released all prices except salaries, which ended up paying the final bill for interrupting the inflationary spiral. With the sudden stop in inflation, even though their real purchasing power was reduced, workers felt safer and supported the plan. The Real plan, which turns 30 this year, was an economic and political success.

The case of Argentina is more complicated, but not very different. The population in general is more politicized, unions are more influential and even with more than 50% of people living in poverty, the Human Development Index in Argentina is still higher than that in Brazil. Imposing new losses through cuts in social programs and mass layoffs of public employees could be a greater burden than Argentine workers would be willing to bear. In this case, your plan to put the brakes on the economy, pushing the cost of economic adjustment onto workers’ shoulders will not be politically viable and your government will fail. But there is a chance that workers exhausted by years of continuous crises and skeptical of traditional political parties will accept paying more of this bill as long as the return is the end or at least a drastic reduction in inflation.

According to the newspaper the State of São Paulo (20/03), “A survey released yesterday by the daily Clarín on the 100 days of Javier Milei’s government in Argentina indicates that the president’s negative evaluation outweighs the positive, but it also shows that the libertarian still maintains surprising support from the poorest – and most affected by its economic policy.” This is an important sign that you need to pay attention to.

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(BL)