Javier Milei and the Legitimacy of Libertarian Policy

When it became clear in late 2023 that Javier Milei would become the next president of Argentina, the response from many economists and analysts was borderline apoplectic. They warned that the profane self-described libertarian—who looks more like a still-touring ’80s rockabilly singer than the classically trained economist he actually is—would inflict on Argentina’s already-beleaguered economy “deep recession,” “devastation,” “economic collapse,” and all sorts of other economic horribles. I, on the other hand, was cautiously optimistic—liking Milei’s initial moves but still worried that Argentina’s problems would prove insurmountable for a dog-cloning, chainsaw-wielding political neophyte facing serious opposition at home and serious skepticism abroad.

Then, a funny thing happened as Milei worked to enact his slash-and-burn agenda: Things in Argentina got better, and the doomsayers went quiet. A few brave souls, to their credit, have since issued mea culpas, but most of them haven’t. That’s probably because doing so would acknowledge the success of not only Milei but also the libertarian ideas they so disdain.

What Milei Did (and Why)

To understand just how daunting a task Milei has faced, it’s important to first reiterate just how bad things had gotten in Argentina before he took office. Thanks to decades of Peronist mismanagement and corruption, an Argentinian economy that once paralleled those of the world’s wealthiest countries had become a global laughingstock with skyrocketing inflation, routine fiscal crises, and crippling poverty. As my Cato Institute colleague Ian Vásquez summarized in January, “Milei inherited a country suffering from more than 200% inflation in 2023, 40% poverty, a fiscal and quasi-fiscal deficit of 15% of GDP, a huge and growing public debt, a bankrupt central bank, and a shrinking economy”—brutal conditions that undoubtedly helped propel Milei into office.

Inaugurated in December 2023, Milei immediately set about to reverse these and other trends by shrinking the bloated Argentine bureaucracy, slashing government spending, and in turn getting inflation under control. Within the first month, he’d cut the number of government ministries in half—from 18 to nine—and cut spending by 30 percent, thus producing Argentina’s first monthly budget surplus in more than a decade.

He then moved to enact an aggressive “omnibus” reform bill, which included vast and structural spending and regulatory reforms but was substantially scaled back because of a still-adversarial legislature. Nevertheless, these and other fiscal reforms achieved what economists Sebastian Galiani and Santiago Afonso called in a November paper “the most aggressive one-year fiscal consolidation ever recorded,” with greater spending cuts in just six months than Argentina’s last right-leaning president, Mauricio Macri, did in four years. Just as importantly, Milei “demonstrated an unprecedented commitment to maintaining” the cuts, as evidenced by “the vetoes President Milei issued against laws approved by Congress that would increase public spending”—moves that “have served to enhance his credibility regarding the future sustainability” of the nation’s new “fiscal equilibrium.”

As shown in a new chart from Goldman Sachs, such credibility is well-deserved:

As Vásquez documents, however, it may be Milei’s deregulatory work that’s even more impressive—and important for Argentina’s future. In a new piece this week, he explains how the Peronists’ power is entrenched in the bloated Argentine bureaucracy, and that Argentina’s regulatory state is simply massive. Thanks to 300,000 different laws, decrees, and resolutions, the Human Freedom Index finds Argentina to be “one of the most regulated countries in the world,” with a regulatory burden ranking 146th out of just 165 countries.

This is where Milei’s chainsaw has been directed. Along with the ministry consolidation (now down to eight), Milei in his first year in office “fired 37,000 public employees and abolished about 100 secretariats and subsecretariats in addition to more than 200 lower-level bureaucratic departments.” He’s also rapidly deregulated across the economy, starting with the broad Decree 70/2023—the so-called Megadecreto (Megadecree!)—and then continuing unabated for the next year. In a December blog post, in fact, Vásquez and colleague Guillermina Sutter Schneider calculated that in Milei’s first year in office, his administration had implemented 672 regulatory reforms (331 eliminated and 341 modified), or around two per day for an entire year.

Perhaps most famous of these moves was in housing, with the Megadecreto’s quick repeal of Argentina’s onerous rent controls and mandatory minimum tenancy requirements to boost an Argentine housing market suffering from real rents that had actually grown faster than the nation’s sky-high inflation. But Argentina’s deregulation efforts hit many other sectors, including pharmaceuticals, technology, transportation, tourism, energy, and agriculture. Milei’s administration also improved regulatory procedures—inspections, testing, permits, licenses, warehousing, personnel, etc.—to reduce burdens on new and existing businesses and to improve enforcement.

Under Milei, Argentina also has liberalized trade. The government has reduced or eliminated various trade regulations, such as import licenses for appliances and clothing, “Buy Argentina” mandates and nationalist shelf-stocking requirements, commercial airline restrictions, and strict limits on imports intended for personal use. The administration also recently announced a “revolutionary deregulation” allowing unencumbered import and export of food that’s already been approved by a competent regulator abroad. It has unilaterally cut tariffs on consumer goods, nixed a blanket tax on all imports (and one on overseas debit/​credit card purchases), and reduced export taxes on agriculture. And, while much of the world is embracing (or terrified of) populism, Milei is out there making big speeches on the benefits (and moral imperative) of free trade and the evils of protectionism.

In these and other moves, Vásquez explains, Milei’s team of legal experts and economists have pursued a clear mission: “to increase freedom rather than make the government more efficient.” And they’re still going: “According to [Argentina’s minister of deregulation and state transformation Federico Sturzenegger], the government has cut or modified 20 percent of the country’s laws; his goal is to reach 70 percent.”

Giddyup.

That said, my Cato colleagues and other free marketers aren’t thrilled with everything Millei has done, and many of his reforms—whether due to a lack of legislative support or simply caution—are modest and incomplete. As Galiani and Afonso show, for example, Milei’s spending moves haven’t come via permanent, structural reforms, meaning that “sustainability is highly dependent on continued public support for the administration.” They add that consumer energy subsidies remain high and “excessively cautious,” while Vasquez notes that “Argentina still has a closed economy with barriers to trade and tight capital and exchange controls” that Milei says he’ll liberalize only once the economy further stabilizes. My Cato colleagues lament, moreover, that Milei has neither embraced “dollarization” (adopting the U.S. dollar as the national currency) nor shut down Argentina’s central bank, both of which are seen as ways to prevent a return to the government’s disastrous history of excessively printing money to finance profligate public spending. (Milei says he is still committed to eventually abolishing the central bank.) Given just how hyperregulated Argentina’s economy was before Milei took over, there’s also plenty more to be done on the regulatory front—something his team openly acknowledges.

With legislative elections in October of this year and polls currently tight, more caution is expected in the coming months—even if the still-closed nation could use much more economic radicalism.

The Results So Far

Nevertheless, it’s increasingly clear that Milei’s reforms have thus far achieved good results that few non-libertarians expected. Most notably, monthly inflation has fallen from a crippling 25 percent in late 2023 to a still-bad-but-undeniably-better 2.4 percent as of February, and experts expect the country’s annual inflation rate to “plunge” to 23 percent in 2025.

For more of this commentary, click here.