Update: The Greatest Political Experiment

Authored by Joel Bowman via substack,

“State intervention is always bad, because it’s based on coercion, on force, and nothing based on coercion can be good.”

~ Javier Milei, speaking at The Hoover Institution in May, 2024

Today we take a break from our road-tripping adventure to offer a quick update from the other End of the World…

Long time readers will recall our fascination over what we’ve been calling, with immodest grandiloquence, The Greatest Political Experiment of Our Age. 

The story so far is that, down at the southern end of the Americas, in our chosen country of self-exile, Argentina, the locals have sensibly chosen to “throw the bums out.” 

That is, in November of last year, the gauchos voted for a man who promised to finally cut their overfed Peronist government down to size. (He even campaigned with a chainsaw, to avoid confusion among the nuance-averse.)

Javier Milei was elected in a landslide and has since taken his motosierra to the thorny brambles of the State with admirable gusto (though, rather to this observer’s disappointment, the nation’s Banco Central, which Milei promised to burn to the ground, remains standing. Still, one lives in hope…)

Doomsday Mongers

The Argentine experiment is particularly interesting in that it represents the first time in modern history that a sizable population (Argentina is home to ~45 million mostly-carnivorous human beings) voluntarily, peacefully, voted to “cancel” their own state. Nor did El Presidente renege on his promise to do just that. 

On day one in office, Sr. Milei abolished or consolidated half the federal ministries, laying off tens of thousands of government parasites in the process and promising more of the same in the days ahead. And just last month, in a major legislative victory, his so-called “Ley de Bases” and fiscal reform package was signed into law, paving the way for sweeping privatization across multiple key industries along with much needed labor market deregulation.

Needless to say, bed-wetting nanny statists around the planet, from Buenos Aires to the DC Beltway to Brussels and beyond, promptly set about prophesying a doomsday scenario, whereby the proud republic of Argentina would shortly descend into a Dantean hellscape the likes of which the civilized world has never known. 

It is to their great and enduring dismay that such a scene has not materialized, though that hasn’t stopped them painting the picture in their newspaper columns just the same. Here’s the latest from our lease-mongering colleagues over in the popular presses…

The worst economic crisis in decades puts Argentine ingenuity to the test under President Milei ~ The Associated Press

Milei’s market honeymoon ends as investors question economic plan ~ The Financial Times

Milei’s Austerity Plan Pushes Argentina Into Recession in First Quarter ~ Bloomberg

And yet, despite having been bequeathed a raging currency conflagration, in which the hot potato peso was inflating at the fastest rate in the world, Milei has been able to avert that all-too-familiar path to catastrophe. Both general and core inflation have collapsed since Milei took office in December, with the latter plummeting from over 30% month-over-month to just 2.3% on a four week rolling basis (through July).

Trend Reversal

Not only that, but workers in the private sector are faring far better under Milei than when Sergio Massa (his main opponent in the presidential election) was serving as finance minister under the previous administration. 

In the first five months of last year, inflation handily surpassed private-sector wage growth (42.2% to 39.4%). Even as inflation rocketed in the back half of last year, wage growth now outpaces inflation (81.7% versus 71.9%). Here’s the chart:

(Tip ‘o the Hat to @OppenheimerAR)

Here is another look at the trajectory of real salaries – that is, adjusted for inflation – on the rise across the economy. (Milei assumed office on Dec. 9, 2023):

(Source: Argentina’s National Institute of Statistics)

Drill, Baby, Drill!

Meanwhile, despite Argentina having the worst projected economic growth of any major economy this year (at least according to the IMF), it nonetheless continues to defy expert forecasts. 

Economic activity rose 1.3% for the month of July, the first month of positive GDP data since Milei assumed office and well above the 0.1% median growth estimates from analysts surveyed by Bloomberg. Year over year economic activity likewise surprised to the upside, shooting 2.3% higher and far exceeding the negative –2.5% expected by those same analysts. 

And here’s unconventional (shale) oil and gas production in the Vaca Muerta oil fields, reaching an all time record… 

(Source: Secretaría de Energía, Argentina)

[Translation: Unconventional oil and gas production in Vaca Muerta registered a historical record in June. In that month, 372 thousand barrels of oil and 78 million m3 of gas were obtained per day.]

Of course, you’re unlikely to hear about any of this in the mainstream news. And that’s hardly surprising…

That Argentina’s success proceeds to the chagrin of rabid interventionists and meddling do-gooders around the world serves only to underscore just how important this experiment in free markets and free people truly is. Long may it continue. 

¡Viva la libertad, carajo!