Argentina's Economy, and Javier Milei's Unhinged Plans to Change It

Recently, a drastically different president has been elected in Argentina–-Javier Milei. Milei is a relative newcomer to Argentinian politics, previously having been a TV celebrity in the South American country. 

Milei is a far-right candidate, has even described himself as an “anarcho-capitalist.” On November 19th, 2023, he won by a wide margin (56% of the overall vote). 

The new president-elect is promising to fix Argentina’s severe economic issues with radical, right-wing policies such as the dollarization of the currency and the abolition of the central bank. 

Before examining the beliefs and policy proposals of Milei, it is first meaningful to examine how this political newcomer gained so much support in the first place. 

Currently, Argentina is in a severe economic crisis. The peso currency inn the country has lost 90% of its value in four years, poverty has increased substantially, and inflation is sitting at 140%. 

Throughout his campaign, Milei has leveraged Sergio Massa’s (the leader of the opposition to Milei) apparent mismanagement of the economy as an argument for why he should be elected president. Javier Milei has likely used Argentinians’ anger at the economy to his benefit. He has convinced them that the only way to solve the inflation and poverty in the country is through radical, far-right politics. 

Milei’s populist rhetoric and messaging have especially targeted young voters in Argentina, a group who are being affected very heavily by inflation and economic trouble. Unsurprisingly, there has been a surge in young voters in the most recent 2023 election. 

Javier Milei is certainly very socially conservative, favoring strict government regulations on euthanasia and abortion. However, the main focus of his campaign is centered around economics, so an analysis of those positions is likely more useful. 

One of the main policies the new president-elect advocates for is the dollarization of the Argentinian economy. Essentially, he believes the local Argentinian currency–-the peso–-should be replaced with the US dollar. This way, according to Milei at least, inflation will be reduced and the country is bound to a much more stable currency. 

This proposed policy has been extensively criticized by economists throughout the global community. Experts have raised concerns that dollarization will further destabilize the economy. 

This is because dollarization would first, in this case, require massive devaluation of the peso, immediately causing more inflation.

Additionally, there are also doubts regarding the amount of US currency Argentina actually has in their central bank to facilitate dollarization. “Where would Argentina get its dollars from? At present, the central bank has almost no US dollar reserves to speak of, and it lacks the access to global capital markets to obtain the stocks that would be required to keep the economy going,” says Larry Elliot, the economics editor for the Guardian. 

Historical precedent surrounding dollarization also does not favor dollarization. In the early 1990s in Argentina, the government instituted a mild version of Milei’s proposed dollarization. Eventually, the economy fell into a severe depression and poverty increased to 65% by 2002 as a result of this implementation. 

Milei also plans to abolish the central bank, privatize many state-owned enterprises in the country, and cut taxes. These acts will likely consequently leave significantly less money and more social programs that support the poor in Argentina. 

Generally, whenever neoliberal leaders and administrations have assumed power in Argentina, an era of further economic instability, poverty, inequality, and overall misery has followed. 

This was the case in the 1990s and early 2000s, when dollarization and other neoliberal reforms led to a depression, and gigantic upticks in unemployment. “Historically, it has been his opponents who have followed a progressive agenda that has boosted the economy, after right-wing governments have gotten macroeconomic policies seriously wrong. This has been true over the past 20 years, as can be seen in multiple data series,” according to the Center for Economic and Policy Research. 

Ultimately, Javier Milei showcases a high level of callousness when it comes to fiscal policy. Instead of seriously considering the economic situation in Argentina, Milei simply advocates for the most extreme right-wing positions possible in order to gather popular support for his presidential campaign.

In reality, Javier Milei’s plans for dollarization and the abolition of the central bank are currently unrealistic. This is because Milei’s party La Libertad Avanza failed to win a large number of seats in the Senate or the Chamber of Deputies, preventing Milei from having a large degree of influence over the legislative branch of government. 

In any case, the future of Argentina, its economy, and its people is uncertain following the election of the new president. Javier Milei assumed office just yesterday on December 10th, 2023.