Monday, May 27, 2024

OPINION AND ANALYSIS | 11-05-2024 06:37

Javier Milei: in love with the ‘cowboy caste’

There is clearly some sort of infatuation with the President and his Austrian economic ideology, along with Argentina. And the global culture war and Milei’s positioning to the right of the spectrum make him even more attractive.

In his short but eventful four months in office, Javier Milei has taken six international trips. Four of those have been to the United States and none of them were official visits. On two of those occasions he met with billionaire Elon Musk, while he also found time to call Donald Trump “Mr. President” during a lightning trip to participate in the Conservative Political Action Conference (CPAC), much to the bewilderment of the Joe Biden administration. 

Much like the one-time ally he’s seemingly discarded until he becomes useful again (Mauricio Macri), Argentina’s ultra-libertarian economist has found incredible support from the international business community. Both Macri and Milei were the rockstars of Davos during their visits to the World Economic Forum, whereas the former was once dubbed “the slayer of populism” by none other than The Economist

While the international press has been more sceptical, certain members of the global financial mainstream have expressed their strong support for Milei and his government plan. During his recent visit to Los Angeles, California, to give a speech at the Milken Institute Global Conference (where he obviously took pictures with Musk), the wild-haired economist garnered the support of a major market heavyweight, Stan Druckenmiller. He’s also received a blessing from Peter Thiel, a visionary venture capitalist who recently visited him at the Casa Rosada, and even Ian Bremmer, who is far from a free-wheeling advocate for absolute laissez-faire, yet remains influential within the US financial sector. 

There is clearly some sort of infatuation with the eccentric Milei and his Austrian economic ideology, along with Argentina, a land of lost opportunity and frequent debt defaults. This time around, though, the global culture war and Milei’s positioning well to the right of the spectrum make him even more attractive, both to his detractors and those aligned.

Druckenmiller is probably one of the most influential voices within the US financial sector. A billionaire hedge fund manager who is a famed investor for having worked with George Soros when they “broke the Bank of England,” making some US$10 billion betting against the British pound in 1992. Interviewed on CNBC’s Squawk Box — which is one of the most widely followed business news TV shows in the United States — he lauded Milei as the “only free-market leader of the world.” 

“This is a highly intelligent leader who was taught in the School of Austrian Economics ,” explained Druckenmiller. “He cut Social Security 35 percent after he came to office.” Highlighting the dizzying speed with which Argentina went from a four to five percent fiscal deficit to a three percent surplus (“They’ve taken a massive hit in GDP, basically a depression for a quarter, and his approval rating has not gone down”), he made it clear that he’d like to see someone doing the same things in the US. Noting that while Argentina’s President isn’t crazy, but rather “on the spectrum,” that Milei is doing “the inverse of what’s going on here” where they are “avoiding all the pain” and going down a path “toward the public sector over the private sector.” To cap it off, he noted he “just hates to see Argentina out-capitalising” the United States.

The fascination with Milei and his anarcho-capitalist “experiment,” as Druckenmiller called it, was shared by Thiel, who visited the Casa Rosada recently alongside Argentine entrepreneur Alec Oxenford. “Peter Thiel told me he believes Javier Milei’s ideas are as relevant on the global level as they are to Argentina,” Oxenford tweeted. Thiel is not only a legendary venture-capitalist investor, but also a public exponent of ultra-libertarianism, who in 2016 supported Donald Trump’s successful presidential campaign. Both Thiel and Milei are fanboys of Ayn Rand and put the individual and the market at the centre of the social construct.

It shouldn’t be surprising that Milei’s popularity among the US business community is formidable. For years they’ve been rallying for lower taxes arguing that in the context of a free-market economic system wealth would trickle down from the top, therefore broadening the base and generating greater growth. They have been strongly aligned with the Republican Party which, in response to former US president Barack Obama, has accelerated its political adhesion to libertarianism, first in the shape of the Tea Party movement and later by being aesthetically tied to Trump. Milei appears to be the hero they would love to have in their own country, adding knowledge of Austrian economics to the anti-wokeism he shares with Trump and other members of the GOP. A knight in shining armour that will liberate a strangled nation from the yoke of leftist populism, proving their world vision true. It’s the same reason why European members of the “new right” are delighted by the Argentine president.

While it is necessary to count on the support of the international community, it is not a sufficient condition for success. The value of getting Musk to tweet, “I recommend investing in Argentina,” is substantial, but also fleeting. While Milei has constructed “synthetic power” through his skillful use of digital communications strategy, and is now creating a global network of high value supporters, he shouldn’t rely on them for true foreign direct investment until he gets the work done at home. And even if investment flowed, there’s no free lunch.

Interestingly, Druckenmiller highlighted how Milei cut payments to retirees and pensioners 35 percent, while generating pain through a one-quarter depression. Not only does Milei deny that the population is paying for the cost of the aggressive austerity plan, but he’s also suggested the majority of the pain is already behind us when most economists suggest a V-shaped recovery is highly unlikely. Druckenmiller also noted that Milei passed some sort of “reforms,” something that hasn’t happened yet and could be very difficult to execute unless pragmatism is sustained. At the same time, global investors aren’t too interested in Milei’s respect for democratic institutions or his attacks on the free press. That’s until, for whatever reason, they decide to turn their back on him.

It will be interesting to see how Milei’s relationship with Wall Street and the US elite continues. While they lent aggressively to Macri’s Argentina, that capital never made it past the superficial layers of the financial system, meaning it was purely liquid. It is important to count on the support of the international financial community, but it will likely be the Argentines with their “mattress dollars” who will commit the majority of the productive investment if the country is to finally find its footing.

Agustino Fontevecchia

Agustino Fontevecchia


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