Power & Market

Argentinian Voters Seek an Escape from 100% Inflation

In a surprising twist to Argentina's political landscape, Javier Milei, known by many as el Peluca ("The Wig") due to his rock 'n' roll hairstyle, secured a significant win in the recent primary elections held on August 13th.

Representing the coalition La Libertad Avanza (“Liberty Advances”), Milei triumphed with 30% of the votes, besting the incumbent president Alberto Fernández's coalition. Clearly, his unequivocal message of shuttering the Argentinian Central Bank resonated with a population beleaguered by an inflation rate of over 100%.

For those unfamiliar with this rising figure in Argentina, Milei is an economist, educated in Buenos Aires' private universities, and is a staunch supporter of libertarian politics and economics.

The politician has a pack of English mastiffs, named after his favorite economists: Milton (Freedman), Murray (Rothbard) and Lucas (Robert Lucas). 

Identifying as a "liberal libertario" and "anarquista de mercado", he is an advocate for a reduced state role, emphasizing the need to cut public expenditure, taxes, and government intervention in the economy.

Milei's ascendancy isn't solely due to his political affiliations or ideologies. His prior prominence came from his roles as a columnist in national publications like La Nación and El Cronista and as a regular guest on television programs. Milei is not without controversy, having faced allegations of plagiarism in his columns and being known for his colorful language and confrontational style. Known for his leather jackets, admiration for Donald Trump, and advocacy for relaxed gun laws, Milei is a figure that polarizes and captivates.

Milei's libertarian ideas stem from deep roots. After witnessing hyperinflation in Argentina during his youth, he decided to become an economist. His later exposure to Murray Rothbard’s works made him an ardent Austrian economics supporter. This transformation was not just philosophical; it had political repercussions. By 2021, Milei's group had secured four of the 257 seats in the Chamber of Deputies. As a member of Congress, Milei's influence has grown, and his presidential aspirations have become increasingly viable. 

The core of Milei's appeal, particularly to the younger demographic, is his anti-state stance. As Argentina continues to grapple with economic difficulties, including high poverty rates and inflation, Milei's condemnation of the political elites as "robbers" and "thieves" resonates with a populace yearning for change. His plan to overhaul the nation's systems and policies could offer Argentina a new direction.

Milei’s solution to intractable inflation in the South American nation is to dollarize the economy and do away with the peso, as Ecuador did in the year 2000. Critics question the practicalities of such a proposal, however, given the central bank has exhausted its domestic supply of dollars in a fruitless attempt at propping up the peso’s rapidly falling value. In addition, international markets have not reacted well to the increased possibility of a Milei presidency, with the Argentinian peso collapsing 20% against the dollar in the two days after the election.

In an article entitled, “Why does the victory of a pro-market candidate like Milei arouse fear among investors?" by Bloomberg Línea, the paradox was explained simply enough: markets do not like uncertainty. But, despite Milei’s lack of experience in politics, his plan appears to be based on sound economic principles and if implemented could do wonders for a nation mired by decades of economic stagnation brought about by welfarism, deficit spending and money printing.

In terms of what's next, if the primary elections are any indication, Milei is poised to make a significant impact on Argentina's upcoming general elections in October. Given the current challenges Argentina faces, the promise of drastic economic reforms and a significant reduction in government intervention might be exactly what voters are seeking. 

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