What are the economic impacts of Javier Milei’s presidency?

by | Apr 8, 2024 | POLITICS

A photo of the Irish landscape, with trees and a waterfall in the foreground, and Castletown manor in the background.

The economic and social opportunities Ireland has demonstrated for its diverse population has attracted people from all over the globe. Many people from Argentina have found a new home in Ireland, often fleeing Argentina’s deep economic and security crisis fuelled by high inflation and devastating poverty. According to the BBC, 40% of the Argentines live under the poverty line, and inflation was at 138%. As such, Argentina recently elected libertarian Javier Milei to the Presidency. Milei ran on a radical and controversial platform, promising to restructure the economy by privatising public companies, defunding the government, and even removing the central bank.

 

The election comes as a shock, but perhaps not a surprise. The financial Times has previously reported almost 40,000 people from Argentina moved to Spain alone, primarily thanks to the high numbers of Spanish and Italian descendants within the country, hence making entry into the EU highly practical through European passports and language or cultural similarities. This is up from under 10,000 10 years ago. Ireland is no exception, and a large Argentine community resides on the island. High rates of emigration are a testament to the chronic economic hardship many people in the country face.

 

These issues have been so devastating for the people of Argentina that they elected a self described “anarcho-capitalist” well known for his radical policies and eccentric personality. He has often been seen in rallies waving around a chainsaw which represents his intentions to slash the size of the federal government, and insulting his left-wing opposition. He has also previously demonstrated the importance of his dogs, naming them after famous libertarian economists and claiming his dead dog told him to run for President.

 

Milei ran on a radical platform that would turn Argentina into an economic experiment. While soon after winning the election he toned down his “anarcho-capitalist” rhetoric, he was determined in slashing down government ministries such as those related to climate sustainability and gender development. Milei promised to dollarize the Argentine economy, and proposed getting rid of the central bank of Argentina entirely, claiming these institutions can’t be trusted with monetary and fiscal policies.

 

Milei’s logic is that the established government and central bank cannot be trusted to formulate the monetary and economic policies of Argentina, because they either print too much, spend too much, or serve only the political class. In this vein, he argues these are simply instruments to “rob” from the people of Argentina.

 

Interestingly, Milei took 70% of the Argentine vote in Ireland, compared to 55% of the overall vote in Argentina, which might highlight the importance of the Milei’s emphasis on economic improvement and how much it resonates amongst economic migrants.

 

Milei has therefore been trusted to perform a macroeconomic experiment on the Argentine economy. While some experts and economists agree more than others with Milei, dollarizing the economy and shutting down the central bank would require immense political will and over 40 billion dollars. Milei has neither.

To fight this division, Milei has previously proposed asking the people of Argentina if they want to shut down the Central Bank through a referendum. He then implied that, if Congress does not match the vote of the people, then this is a clear example of political elitism working against the interest of the people.

 

However this is an extremely difficult task, and Milei will need over $40 billion. This amount would cover debt payments of Argentina’s central bank, and cover the pesos in circulation within the economy and within savings. While experts are disputing the exact figure and measures needed, Milei has an uphill battle if he wants to ensure he keeps his electoral promises. He seems to understand this well, and has commenced his plans by deregulating the economy, essentially opening everything up from the domestic markets to beginning the privatisation of state companies or lowering taxes. He has done this with over 300 measures to deregulate the economy.

 

While he has met political opposition with these measures, he is attempting to go further by presenting congress with perhaps the most radical bill it has ever had to vote on: the “omnibus law”. This bill consists of 664 articles that challenge and change previous norms by declaring a “public emergency” for at least two years in which the Executive Branch (him and his cabinet) could assume powers that correspond to the Congress. 

 

Due to strong political opposition and unfortunate economic realities, Milei will find it difficult to introduce his plans. Furthermore, while it remains to be seen how much he will actually be able to do, and what the consequences of this will be, his radical economic measures have demonstrated how serious he is at fulfilling his promises.

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