“The Market is Ourselves”

“All men dream, but not equally. Those who dream by night in the dusty recesses of their minds awake to find that it was vanity; but the dreamers of day are dangerous men. That they may act their dreams with open eyes to make it possible.”

I recalled that T. E. Lawrence (“Lawrence of Arabia”) quote on watching a recording of the talk Argentine President Javier Milei gave at the Hoover Institution in Stanford University on May 29th. He’s a dangerous man. He’s making his dream possible.

Argentina has been tremendously unlucky for over a century. It appears that its luck may be changing.

At the start of the 20th century, it was one of the wealthiest nations in the world, with a high standard of living comparable to many European countries. Then things went south. By 2001-2002, things had gone really bad.

Argentina defaulted on its sovereign debt in December 2001, leading to a severe economic crisis. The peso was devalued, and the economy contracted by around 20% between 1999 and 2002. Poverty and unemployment rates soared, with over 50% of the population living below the poverty line.

(I append a brief summary of Argentina’s economic trajectory over the 20th century at the end of this post.)

But now it appears that there’s hope for Argentina with the election of Javier Milei. He’s an economist. Most importantly he’s an economist who understands capitalism. Even more remarkably he, like me, understands the Austrian economics of Mises and Hayek.

His talk at the Hoover Institution is the most amazing talk by a political leader I’ve ever heard. As he says in the talk, once an economist, always an economist.

The president of a country referring to Brouwer’s and Kakutani’s fixed point theorems? Impossible! Note to self: post a brief on those fixed point theorems.

But for now, here’s Javier Milei at Stanford. I listened to it at 1.25x speed.

Here’s a bit from the press release reporting on the event over at Hoover.org:

“Reality is complex, but when the model doesn’t match reality, you get rid of it,” he said. “You don’t get angry with reality.”

Milei argued that many twenty-first-century leaders see every failure of an economic model as proof of a market failure warranting government intervention.

He added that the state interventions are slowly strangling our ability to generate economic growth.

“Let us not allow the fatally conceited to destroy our lives with regulations.”

Throughout his speech of more than one hour, Milei brought up luminaries who’ve shaped his worldview, including Adam Smith, Friedrich von Hayek, Milton Friedman, Henry Hazlitt, and Murray N. Rothbard. He described how they influenced his view that everything should flow from the promotion of private enterprise and maximum possible growth, and that state intervention often only exacerbates the problem it was intended to solve.

Milei described himself as a libertarian and a minarchist who believes the role of the state is only to protect individuals and their property from aggression.

While talking about the challenges of governing and the Austrian school of economists who influenced his worldview, he suggested that it may have been his love of conflict that brought him away from work as an economist and television commentator and into the position he finds himself today.

I hope Milei is able to rescue his beloved Argentina.

As promised, here’s a summary of Argentina’s economy since 1900.

Summary of Argentine economic history

Argentina’s economic history over the 20th century has been marked by periods of prosperity and crisis, with the country failing to sustain long-term economic growth and stability.

Factors such as political instability, external shocks, economic mismanagement, and a reliance on commodity exports have contributed to the country’s economic challenges.

1. Early 20th Century (1900-1929):

• • Argentina experienced a period of economic growth and prosperity, driven by agricultural exports (particularly beef and grain) and foreign investment
  • It was one of the wealthiest nations in the world, with a high standard of living comparable to many European countries.

2. Great Depression and World War II (1930-1945):

• •  The Great Depression in the 1930s severely impacted Argentina’s export-oriented economy, leading to a decline in economic activity and widespread unemployment.
  • The government implemented import-substitution industrialization policies to promote domestic manufacturing and reduce reliance on imports.

3. Peron Era (1946-1955 and 1973-1976):

• • Juan Perón’s populist policies included wage increases, social welfare programs, and nationalization of industries.
  • Initially, these measures boosted economic growth and improved living standards for the working class.
  • However, excessive government spending, inflation, and mismanagement led to economic crises and instability.

4. Military Dictatorships (1976-1983):

• •  The military junta implemented neoliberal economic policies, including privatization, deregulation, and trade liberalization.
  • These reforms initially led to economic growth but also resulted in high inflation, income inequality, and a debt crisis.

5. Hyperinflation Crisis (1989-1991):

• • Argentina experienced one of the worst hyperinflation episodes in modern history, with monthly inflation rates reaching over 200%.
  • This crisis led to a severe economic contraction, widespread poverty, and social unrest.

6. Convertibility Plan and Recovery (1991-2001):

• • The implementation of the Convertibility Plan, which pegged the Argentine peso to the U.S. dollar, helped stabilize the economy and curb inflation.
  • This period saw economic growth, increased foreign investment, and rising living standards.

7. Economic Crisis and Default (2001-2002):

• • The rigid currency peg became unsustainable, leading to a financial crisis, a sovereign debt default, and a severe economic recession.
  • Poverty and unemployment rates soared, and the country experienced social and political turmoil.

8. Recovery and Commodity Boom (2003-2011):

• • The implementation of expansionary economic policies, coupled with a favorable global commodity market, led to a period of economic recovery and growth.
  • However, the economy remained vulnerable to external shocks and structural weaknesses.

9. Interventionist Policies and Economic Slowdown (2012-2015):

• • The Kirchner administration implemented interventionist policies, including import restrictions, price controls, and increased government spending.
  • A decline in commodity prices, led to an economic slowdown and rising inflation.
  • Foreign currency reserves dwindled

10. Macri’s Reform Agenda (2015-2019):

• • • Mauricio Macri’s center-right government aimed to implement market-friendly reforms and restore investor confidence.
    • Measures included lifting currency controls, cutting subsidies, and seeking to reduce the fiscal deficit.
    • However, these reforms initially led to a recession, high inflation, and increased poverty rates.

11. Crisis and Debt Restructuring (2018-2019):

• • • Argentina entered another economic crisis in 2018, marked by a currency crisis, high inflation, and a sharp economic contraction.
    • The government negotiated a $57 billion loan from the International Monetary Fund (IMF) and restructured its debt with private creditors.

12. COVID-19 Pandemic and Economic Impact (2020-2022):

• • • The COVID-19 lock downs led to a sharp contraction in 2020.
    • The government implemented fiscal stimulus measures and debt restructuring to mitigate the economic fallout.
    • Recovery began in 2021, but inflation remained high, and economic challenges persisted.