Argentina’s free market reforms a lesson for America

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While most Americans have been keenly focused on our presidential politics, I’ve been looking at matters farther south: Argentina to be exact where the country is in the midst of a libertarian experiment — thanks to eccentric President Javier Milei. The experiment has only recently begun, but it can provide a valuable lesson to America’s policymakers that more government isn’t always the answer. Less government generally is.

“Before World War One, (Argentina) ranked as one of the world’s 10 richest countries,” the BBC remarked. “But a subsequent slow economic contraction was substantially accelerated by the populist policies — and overspending — of President Juan Perón, who was in power from 1946 to 1955.”

Few people have loomed larger over Argentina than Perón, who left the country largely in the grips of Peronist socialism. The results have been devastating. Years of populist ideology in action cratered Argentina’s economy. “We’re the country of beef, but we can only afford chicken,” remarked one Argentine. Global Finance Magazine now ranks Argentina as the 74th -richest country, and it has been mired in economic crises.

When Milei rose to power, Argentina was in the midst of crippling hyperinflation. The inflation rate for 2023 stood at 211 percent; the government’s debt reached an all-time high in 2023 rising to over $400 billion; the housing market languished; and the nation’s peso plunged. However, one need only look at the “black market” rates to determine the pitiful state of the peso.

“Strict capital controls on official currency trading limits formal access to dollars and has spawned a wide array of parallel rates where dollars trade at a huge premium, over 900 pesos per greenback versus 350 at the official rate,” reported Reuters in 2023. Given these realities, the government repeatedly failed to balance a budget or cool inflation, and Argentinians struggled to buy necessities.

Against this backdrop, Milei campaigned as a libertarian reformer and promised drastic changes—even attending rallies with a chainsaw in hand symbolizing his promise to cut government. He won his election, and unsurprisingly, his subsequent actions were far from subtle.

Milei slashed government spending, cut government ministries, reformed the peso, abolished rental controls, vetoed a measure to increase pensions and so forth. The results have been eye-opening. In September 2024, inflation reached a 31-month low. The government has been logging fiscal surpluses, which it desperately needs to pay down debt, and the rental housing market seems to be correcting.

“The Argentine capital is undergoing a rental-market boom. Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170 percent,” The Wall Street Journal noted. “While rents are still up in nominal terms, many renters are getting better deals than ever, with a 40 percent decline in the real price of rental properties when adjusted for inflation since last October.”

Milei isn’t finished either and would probably like to go much further, but his governing philosophy often stands in stark contrast with many other government officials — limiting what he can accomplish. Put simply, one president cannot solely change an entire country’s trajectory. It takes a collective effort and free enterprise.

Nevertheless, the positive developments should be cause for celebration, and they seem to provide a lesson that more government — sometimes presented as a cure — is often the disease. Getting government out of the way can help an economy heal naturally and eventually thrive. Meanwhile, more government can be an impediment.

Despite these impressive results, matters are far from rosy in Argentina. The nation is still in the throes of a debilitating crisis. Unemployment and the poverty rate have increased on Milei’s watch. Much of that may be due to a correction aligning with Argentina’s economic realities and because reforms take time to more broadly take effect. Regardless of the cause, it matters little when people cannot afford food to eat, but their future seems brighter now.

It is far too early to call this an “economic miracle” in the way writer David Sirota gushed over Hugo Chavez’s socialist regime in Venezuela, which ultimately fell into a depression. Economics is a complex science with a host of variables, and even the best economists cannot tell the future. Outside forces, including natural disasters, war, pandemics and corruption, can undermine economic progress.

However, history tells us that big-government socialism underperforms, while smaller-government capitalism overperforms in the long run. Only time will tell how Argentina’s libertarian experiment will turn out. No matter how it does, if I had the choice between more or less government, then I’d generally choose less, and you should too. Hopefully, America’s policymakers will take note.

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