JAVIER MILEI MEANS MORE OF THE SAME FOR ARGENTINA / PROJECT SYNDICATE

Javier Milei Means More of the Same for Argentina

Javier Milei, the right-wing Argentine populist and presidential hopeful, is being touted by some as the man who will save his country’s economy. But Milei’s main calling card is not the soundness of his policies – some of which are truly bizarre – but his performance of indignation.

Andrés Velasco

LONDON – According to psychologists, confirmation bias is one of the most common tricks our brains play on us. 

Unwittingly, we distort evidence to continue believing what we want to believe. 

That is what many commentators are doing in the wake of the primary victory by Javier Milei, the right-wing Argentine populist and presidential hopeful.

The Wall Street Journal writes that the “Argentine middle class may no longer accept a status quo that robs them of the fruits of their labor,” and sings Milei’s praises for wanting to “open markets, cut public spending, end capital controls, and privatize state-owned enterprises.” 

A respected local consultant writes in his report to clients that Argentina is finally going back to the late nineteenth century, when free enterprise reigned unhindered.

They wish. 

Something big is happening in Argentina, but it is not a grassroots free-market movement. 

It is an anti-establishment revolt, of the kind Latin America specializes in nowadays. 

The only party to have been returned to office recently was Daniel Ortega’s in Nicaragua, and Ortega stole that election.

Many upstart presidents, from Andrés Manuel López Obrador in Mexico and Pedro Castillo in Peru to Gustavo Petro in Colombia and Gabriel Boric in Chile, won by railing against the “oligarchy” and those who have been “forever powerful.” 

That is exactly what Milei is doing today when he declares that “it is time for them to go” and vows to get rid of the “ruling caste” by giving them “a good kick in the ass.”

Confirmation bias leads to overinterpretation of events. 

After Chileans took to the streets in massive (and often violent) protests in 2019, and elected a constituent assembly that leaned to the far left in 2021, progressives were quick to conclude Chileans had “woken up” to the evils of inequality and the country would never be the same

They wished. 

The dodgy draft constitution produced by that assembly was overwhelmingly rejected by voters, who then went on to elect another assembly, this one dominated by the far right. 

In today’s political headlines, social ills and inequality have been replaced by polls suggesting that voters want leaders who will deport immigrants and take a hard line on crime.

Milei is often described as a libertarian, but that is also wrong. 

Libertarians give priority to people’s right to choose, and he is against abortion and sex education. 

He was also the long-time adviser to Antonio Bussi, the general who served as governor of Tucumán province during Argentina’s military dictatorship. 

He is a classic authoritarian populist who happens to be right wing just because the ruling party is left wing.

The anti-establishment message is seldom delivered by soft-spoken men in somber outfits. 

And the extravagance of Argentina’s politicians – who can forget former president Carlos Saúl Menem, in a baby blue suit, showering cash on voters from the top of his campaign bus – is well known. 

But even for Argentina, Milei is an outlier. 

Most international media reports mention his promise to close the central bank and replace the peso with the US dollar. 

In fact, he vows to “smash” the central bank, literally.

Milei became known in Argentina for a television program in which, among other antics, he celebrated his birthday by being blindfolded and destroying a model of the central bank building with a stick. 

In another appearance, he popped a huge yellow balloon labeled central bank while screaming, “It is crazy to carry on with this piece of shit!”

It is the smashing, not the target, that gets the attention. 

Had Milei chosen to destroy a maquette of the Palace of the Argentine National Congress, his fans would have cheered just as enthusiastically.

Asked in a recent interview whether he believed in democracy, Milei replied he could not answer the question without reference to Kenneth Arrow’s impossibility theorem. 

In a tweet, he lambasted critics of his dollarization proposal for not understanding the transversality condition. 

This is erudition used not for illumination, but for evasion and obfuscation.

Argentine Spanish gave the language a useful neologism: a chanta is the kind of charlatan who cannot stop boasting and might just slip his hand into your pocket while you stand there, mesmerized by his chatter. 

As one of his beloved Chicago economists might say, Milei is the Argentine chanta by definition.

None of this is to deny that the ruling Peronists are demagogues whose government, under President Alberto Fernández, has been extraordinarily inept: inflation will exceed 150% this year, the economy is in recession, and central-bank reserves are negative to the tune of $7 billion. 

Previous Peronist governments have also been corrupt: the video of President Cristina Kirchner’s former minister of public works stashing $9 million in cash behind the walls of a convent is hard to banish from memory.

But Milei offers cures for none of this. 

Consider his much-ballyhooed dollarization plan. 

The standard technocratic critique is that Argentina and the United States are not an optimal currency area; therefore, Argentina would be left exposed to shocks it could not control.

The reality is even worse. 

Buying up the pesos currently in circulation would cost roughly $40 billion which Argentina does not have. 

Some pro-Milei economists argue that the dollars could be borrowed abroad. 

But what happens if the loan is called in early, as it could well be? 

The money supply vanishes overnight and Argentina ends up in its own Great Depression.

Dollarization is sometimes sold as the only way to discipline Argentina’s out-of-control fiscal deficits. 

But since Ecuador dollarized in 2000, it has borrowed abundantly and flirted more than once with default. 

Adopting the euro did not protect Greece from a fiscal implosion or deter the other countries of southern Europe from unsustainable borrowing. 

If anything, by keeping inflation and interest-rate spreads artificially low, “euroization” may have exacerbated the incentives to overborrow, as UCLA’s Aaron Tornell and I predicted back in 1994.

Luckily for Milei, this election is not about the soundness of policy proposals, but about who is more indignant, who is a better attention-seeker, and who can vow to get rid of the ruling elite with a bigger kick in the ass. 

In all three domains, Milei runs circles around his opponents. 

That is what makes him the frontrunner.

Andrés Velasco, a former presidential candidate and finance minister of Chile, is Dean of the School of Public Policy at the London School of Economics and Political Science. He is the author of numerous books and papers on international economics and development, and has served on the faculty at Harvard, Columbia, and New York Universities.