Next Tuesday President Javier Milei completes his first year in office. Since February, 2024 has been the Year of the Dragon for the Chinese but the Milei fan club might well prefer to redefine it as the year the inflationary dragon was slain by the libertarian lion. Nevertheless, it is not just that nothing is ever black and white, as the militants pretend – this first year in office has seen much more grey than its inflamed and somewhat arbitrary crusade against the “caste” of drab democratic politics would care to admit.
In a year of good and bad news, the La Libertad Avanza administration has been remarkably successful in concentrating an extremely high percentage of the latter into its first quarter, thus feeding the current widespread perception of progress extending to a certain euphoria in the markets. Yet it is always difficult to give full marks to a year of negative economic growth. This need not be an automatic disqualifier – this space has referred more than once to the 1982 of Chile when the economy shrank by a horrific 14 percent but in the process paved the way for over three decades of growth by cleaning out the deadwood and raising productivity to levels which could compete on global markets.
Argentina has no comparable experience (although both the 1989 hyperinflation and the 2001-2002 meltdown were followed by several years of growth) but even less in this first libertarian year. Both the bloated public sector and a protected, inefficient manufacturing industry shed an almost identical figure of around 30,000 jobs, a minimal percentage – the Chile of 1982 this was not and nor could it have been with an elected government lacking 90 percent of the Senate and ruling in no province instead of a military dictatorship. There has been only been minor tinkering with currency and capital controls (despite a single-digit percentage difference between official and parallel exchange rates, a stability which the economic team seems to find too precarious to lift controls and they would have their reasons) – the export duties hamstringing the farming sector continue. In these terms the libertarian revolution has been smoke and mirrors masked by “cultural wars” – sound and fury signifying almost nothing.
This does not mean that nothing has changed – in so many areas this year has been a question of two steps back (invariably in its first quarter) and one step forward. Despite the dramatic deceleration of inflation, this is true of prices, real wages, the poverty levels and much else. Around one-third of pensions were obliterated in the first quarter of the year but in the second half of the year there have been small monthly percentage gains as a result of updating to a previous inflation in steady retreat – in fairness to this government, it should be said that the updating system inherited from the previous Frente de Todos presidency continued into that disastrous first quarter but it was cynically maintained because of the huge fiscal savings.
Such savings have made possible the fiscal surplus underlying the tumble in inflation in turn underpinning the government’s popularity as this year’s main gains – the fruit of a monothematic monetarism (based on the primitive but nevertheless valid premise that printing money is inflationary). Yet the quality of that surplus leaves much to be desired (as the International Monetary Fund has pointed out) with some creative accountancy and postponed reforms when the brutal cuts fail to turn red into black. The damage to the social fabric has been huge but also a significant economic cost with modernisation of infrastructure delayed by the suspension of public works – the lucrative energy industry paying some of its own costs with the TGS extension of the renamed Perito Moreno gas pipeline is scant compensation. Using Kirchnerite corruption to justify this fetter on growth is one of many cases of throwing out the baby with the bathwater – human rights would be a further example.
One paradox of this administration constantly belittling gender politics and women’s rights is that two of its main achievements have come from female ministers. Security Minister Patricia Bullrich has virtually banished the irksome pickets from the streets while despite heading a chaotic and ramshackle portfolio (social policy, education and labour among other areas), Human Capital Minister Sandra Pettovello has done yeoman work in weeding the middlemen out of the distribution of social welfare benefits. Former foreign minister Diana Mondino was less successful but fell victim to a disastrous foreign policy rephrasing the famous Clausewitz maxim of war being a continuation of diplomacy by other means to diplomacy being the continuation of ideology by other means.
A work in progress – with plenty still lying ahead.
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