Milei Chronicles (5) Anger and the Economy

Javier Milei Milei Chronicles
Javier Milei Milei Chronicles

Vote anger at a lack of options

Milei’s voters just don’t care! They want change and he offers it. He channels their anger. Like former US president Trump, Milei’s fan-base are sick of being ignored and ready to break Argentina if they must do, so that something (anything) new can evolve.

They argue that things can’t get much worse. Are they right?

Neither UxP nor JxC offer significantly different policies on key economic issues for Argentina in a global context. Neither, for example, take particular issue with devaluing the currency for a cheaper labour force even if it means Argentinians can’t afford to travel outside their own false and collapsing economy as their currency is literally valueless elsewhere. Both also agree on low taxation regimes and a high degree of evasion. For example the royalties applied to the mining sector are horrendously low and when the JxC alliance came into power they actually dropped them further to levels that would make an African nation blush (for copper for example Argentina 3%, Ghana 5%, Chile 14%) all the time providing generous state subsidies to those same extractive industries. To cover the lack of state income both JxC and UxP are over-reliant on selling high-yield —albeit often defaulting⏤ dollar- and peso-denominated bonds. Stae disfunction, and corporate corruption, has led to levels of national debt which forces the country, again and again, into default and expensive restructuring so that the country is now the IMF’s largest global client. Neither disagree that to fill the gap between absent taxation and government more debt not less spending or more taxation (or less graft) is the answer. Neither are willing to audit the national debt as there be monsters! Both are extremely generous when it comes to extraordinary energy subsidies and a variety of other state subsidies to local industry including foreign-owned multinationals. For populist reasons both also support cheap, often free, residential energy to increase their chance of reelection. Neither JxC nor UxP have any other plan for Argentina other than a blunt export-focused state-subsidized continuation of current policies providing lots of low wage jobs and bring in dollars which are immediately spent to pay their own graft or repay interest on national debt. Not unsurprisingly this policy is also advocated by Argentina’s main creditor: the IMF.

Argentine primary exports are dollar denominated commodities such as soybeans, gold, grains, fracked gas and oil as many of their industrial exports are non-competitive (at least at the prices they charge internally). A focus on extractivism also makes any form of climate mitigation highly unlikely or quite impossible but neither JxC nor UxP shed a tear for the environment. As to the environment, a topic rarely even discussed by Milei, he is true to his international ultra-liberal clones espousing climate denial no matter if the results (dengue in the capital flooding etc…) are disasters for the general population. To give Milei his due his market friendly is entirely incompatible with any action on the climate as climate collapse is inconvenient, to put it mildly for the gods of the Market. Also to be clear neither UxP nor JxC offer anything on the climate mitigation front except excuses but they do at least measure the damage done.

Life’s Little Differences

Where Argentina’s casta do allow their political blocks to compete on policy it’s on state ownership and subsidies. These include differences on privatization or nationalisation of monopolies. State industry is currently favoured by the Kirchnerista factions of UxP, indexed Christina Fernández de Kirchner, currently the outgoing vice-president, re-nationalized most of YPF (the state oil company) and Aguas Argentinas (the closest thing Argentina has to a national water agency).

Failure to Deal With Inflation and the Collapsing Currency

Neither faction had been able to resolve inflation which has been out of control for more than a decade. There is gross inaction on breaking cartel pricing agreements (a policy logically essential in a protectionist nation that offers no viable competition from abroad). This is a sensitive issue to the Argentine casta who are unwilling to put their companies high margins up for negotiation. Both JxC and UxP rely solely, and completely unsuccessfully, on voluntary price agreements (such as the supermarket just prices agreements). Inaction on competition has led to massive inflation for decades, in 2023 it is currently 110% per annum.

Milei deflects such market criticism using Mises and other right-wing economic theorists blaming excessive peso emission. This is Mises dogma, it is not the reality of price increases and the pressure from exporters to devalue the currency for a cheaper labour force.

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