Goodbye to all that, perhaps

In large parts of the Western world, pessimism is very much in fashion. France’s President Emmanuel Macron fears his country could be sliding towards civil war. Similar thoughts are going through the heads of eminent politicians in the United States, where it is assumed that either the electoral triumph of Donald Trump in November or his defeat by the senile Joe Biden (or whoever is picked to replace him if he stumbles once too often) could set off some extremely violent riots. Elsewhere, the mood is equally grim; what with Vladimir Putin’s Russia glowering at her European neighbours and Xi Jinping’s China threatening Taiwan, talk about a “third world war” between the democracies led by the United States and a clutch of autocracies is no longer considered outlandish.

For now at any rate, in Argentina, where conditions for most people are far worse than they are in the US or Western Europe, the mood is very different. Though President Javier Milei does agree with his foreign counterparts that we are living through what Germany’s hard-pressed Chancellor Olaf Scholz memorably called a “Zeitenwende,” a turning-point in which the old gives way to the new and almost everything changes, he thinks this is something to celebrate.

The reason is simple. While for North Americans, Europeans and East Asians such as the Japanese and South Koreans, the years that have gone by since the end of World War II have seen economies get far more productive and living standards rise to levels that would have astounded previous generations, in Argentina they have been marked by decline. It is therefore understandable that many people in the developed world feel nostalgia for the days in which it was comfortably assumed that, despite occasional reverses, things would continue to get better, and that Argentines desperately want to say goodbye to a disappointing past.

From a European or North American standpoint, the “May Pact” Milei persuaded most of the provincial governors to sign in a low-key ceremony that was held in Tucumán when Independence Day was just beginning, is an unremarkable document. Seeing that the only alternative to almost maniacal austerity is hyperinflation, having politicians commit themselves to ensuring that government spending does not exceed what the country can afford will not strike them as a revolutionary proposal.

However, getting public spending back down to where it was as a proportion of the gross national product before former president Cristina Fernández de Kirchner, got to work and did her utmost to give “the people,” by which she meant her electoral clientele, what she thought it deserved, will be extremely difficult. Large numbers of state employees may be every bit as useless as those who think the public sector should be drastically slimmed down say they are, but firing millions of them would merely replace what is a major problem with an even greater one.

Milei clearly believes that Argentina started to go downhill a century ago and that to recover the lost ground she will have to emulate the countries which, after many ups and downs, did manage to enrich themselves. He takes it for granted that, if enough people adhere to principles that have accompanied success elsewhere, the economy will eventually enjoy an uplifting boom. He could be right, but for the foreseeable future the country’s economic performance will continue to depend less on the entrepreneurial talents of local businessmen freed from the red tape tying them down than on the availability of raw material resources that, once adequate legal safeguards are in place, should attract large investments. Were it not for the Vaca Muerta shale deposits, the lithium lakes, the minerals that have remained underground because they belong to the nation and therefore should be left untouched and, of course, the internationally competitive farming sector, medium-term prospects would be far bleaker than they are thought to be.

Like Mauricio Macri before him. Milei is convinced that for Argentina to prosper he and his supporters will have to win the “cultural battle” they are waging against the many who have become accustomed to behaving as though they thought that the economy was already in fine shape so they could concentrate on sharing out the proceeds in what to their mind is an equitable manner. In this endeavour Milei has had some success; it seems that most politicians, even ones long associated with left-leaning tendencies, now understand that free-market capitalism does have its merits. However, before victory comes within sight they will have to persuade businessmen big and small that they must learn to compete with the best and most ruthless of their counterparts in the rest of the world and, what in the long run will be even more important, convince members of the general population that their personal future will depend almost entirely on their own individual efforts.

Argentina is not the only country in which companies which would like to hire more people find that most applicants lack elementary skills, such as an ability to understand written instructions, count beyond 10, turn up on time and so on and so forth. However, if recent reports are anything to go by, Argentina is worse placed in this respect than some other countries in Latin America. This means that if the economy finally does start growing at a rapid pace, companies will either have to import qualified workers from abroad, as some started to do when Carlos Menem was in office, or rely far more on computerised automation which, needless to say, would have a negative impact on employment.

In the richer countries, the gap between those who are able to take advantage of technological progress and the many who, in one way or other, are harmed by it, has widened sharply of late and helped bring about the political turmoil that has so many people worried. Here, the proportion of the population that possesses the skills and aptitudes needed for a modern economy to function well is smaller than in the developed world. This means that for Argentina to rejoin it, not just the educational system but also the attitude towards it of much of the population would have to change. Unless it does so very soon, the country will continue to depend too much on its natural resources rather than on human capital which, as the success of companies that rely entirely on brainpower has made evident, is far more valuable.