Trump Junior in Argentina… Sort Of

 

“My contempt for the state is infinite” 

Argentina’s President Javier Milei

Argentina has a long history, a checkered past if you will, with populism. On the heels of WWII, “[a]fter a campaign marked by repression of the liberal opposition by the federal police and by strong-arm squads, [Juan] Perón was elected president in February 1946 with 56 percent of the popular vote… Perón set Argentina on a course of industrialization and state intervention in the economy, calculated to provide greater economic and social benefits for the working class. He also adopted a strong anti-United States and anti-British position, preaching the virtues of his so-called justicialismo (‘social justice’) and ‘Third Position,’ an authoritarian and populist system between communism and capitalism…

“If Perón did not structurally revolutionize Argentina, he did reshape the country, bringing needed benefits to industrial workers in the form of wage increases and fringe benefits. He nationalized the railroads and other utilities and financed public works on a large scale. The funds for those costly innovations—and for the graft that early began to corrode his regime—came from the foreign exchange accumulated by Argentine exports during World War II and from the profits of the state agency that set the prices for agricultural products. Perón dictated the country's political life by his command of the armed forces. He severely restricted and in some areas eliminated constitutional liberties, and in 1949 he arranged a convention to write a new constitution that would permit his reelection.” Britannica. Cronyism and patronage were Perón’s currency for years. Even as a popular “hero to the people,” he was a brutal, arrogant populist tyrant… but finally deposed in 1955. His policies have risen and fallen over the years since.

Unlike the United States, which financed its “guns and butter” deficits through an internationally accepted sale of US bonds with the US as the effective guarantor, populist programs in Argentina over the years were funded by devaluing the peso into oblivion and facing IMF and global bailout lending… and repeated defaults, all sorts of failed price controls and currency limitations. Argentina has become a trope for banana republics rife with populist mega-inflation. And last year, they elected a government hating populist strongman: Javier Milei. Starting with the phrase “Argentina’s president is idolised by the Trumpian right. They should get to know him better,” the November 28th The Economist looked at this antigovernment paradigm, often erroneously cast as the Latin American equivalent of Hungary’s PM, Viktor Orbán:

“Many people in America hope that the new Trump administration will take an axe to a bloated and overbearing government, cutting spending and rolling back regulation. Whether this goal is even plausible any more is a crucial question for America and the world, after two decades in which government debt globally has risen relentlessly, fueled by the financial crisis of 2007-09 and the pandemic. For an answer, and a case study of taming an out-of-control Leviathan, head 5,000 miles south from Washington, where an extraordinary experiment is under way.

“Javier Milei… campaigned wielding a chainsaw [pictured above], but his economic programme is serious and one of the most radical doses of free-market medicine since Thatcherism. It comes with risks, if only because of Argentina’s history of instability and Mr Milei’s explosive personality. But the lessons are striking, too… The left detests him and the Trumpian right embraces him, but he truly belongs to neither group. He has shown that the continual expansion of the state is not inevitable. And he is a principled rebuke to opportunistic populism, of the sort practised by Donald Trump. Mr Milei believes in free trade and free markets, not protectionism; fiscal discipline, not reckless borrowing; and, instead of spinning popular fantasies, brutal public truth-telling.

“Argentina has been in trouble for decades, with a state that handed out patronage, politicians who lied and a central bank that printed money to paper over the cracks… It is so far the only country in modern economic history to have tumbled from rich-world status back into the middle-income bracket.

“Mr Milei was elected with a mandate to reverse this decline. His chainsaw has cut public spending by almost a third in real terms, halved the number of ministries and engineered a budget surplus. There has been a bonfire of red tape, liberating markets from housing rentals to airlines. The results are encouraging. Inflation has fallen from 13% month on month to 3%. Investors’ assessment of the risk of default has halved. A battered economy is showing signs of recovery.

“What is fascinating is the philosophy behind the figures. Mr Milei is often wrongly lumped in with populist leaders such as Mr Trump, the hard right in France and Germany or Viktor Orban in Hungary. In fact he comes from a different tradition. A true believer in open markets and individual liberty, he has a quasi-religious zeal for economic freedom, a hatred of socialism and, as he told us in an interview… ‘infinite’ contempt for the state. Instead of industrial policy and tariffs, he promotes trade with private firms that do not interfere in Argentina’s domestic affairs, including Chinese ones. He is a small-state Republican who admires Margaret Thatcher—a messianic example of an endangered species. His poll ratings are rising and, at this point in his term, he is more popular in Argentina than his recent predecessors were.

“Make no mistake, the Milei experiment could still go badly wrong. Austerity has caused an increase in the poverty rate, which jumped to 53% in the first half of 2024 from 40% a year earlier. Mr Milei could struggle to govern if resistance builds and the Peronist opposition is better organised. Investor confidence will be tested if he finally removes capital controls and shifts an overvalued peso to a flexible exchange-rate regime: a currency slump could test nerves and push inflation back up. Mr Milei is an eccentric who could become distracted by culture wars over gender and climate change, and thus neglect his core mission of restoring Argentina’s economy to growth.” Like Milei, Trump’s success depends most on economic success, even eclipsing his main theme “immigration” detain and deport extremism. And if indeed Trump forces his economic policies down America’s throat (and more than a few trading partners), his chainsaw could indeed sputter and die… and perhaps be turned on him.

I’m Peter Dekom, and we can learn a great deal by watching how the policies of elected autocrats rise, fall or truly collapse the nations that elected them.