What’s happening in Argentina is an unprecedented endeavor in free markets. If it succeeds, it could cast doubt on how things are run in America and around the world. Proponents of big government, unlimited spending, and ballooning debt can’t have this, so they want it to fail.
BY LAU VEGYS FOR CRISIS INVESTING
Last week, my missus, the kids, and I left our green refuge in Paraguay for the country of Argentina.
Despite being just a 2-hour flight from Asuncion, the capital of Paraguay, Buenos Aires feels worlds apart. Asuncion is cozy and relaxed, while Buenos Aires boasts grand European-style buildings, a bustling vibe, and crowds always in a rush. Plus, being in the Southern Hemisphere, the weather is much colder here in winter.
Whenever I’m Argentina, I’m reminded of what the country could have been.
Not many people know this, but in the late 19th century, Argentina was the richest country in the world. It had a GDP per capita of $5,786, with the United States in second place and Belgium in third.
In fact, Argentina was so rich that the French used the phrase “riche comme un Argentin” (“rich as an Argentinian”).
The South American nation had all the ingredients to become the 20th century’s ultimate success story. But it didn’t. Instead, it has become one of the world’s poster children for hyperinflation, out-of-control government, and economic mismanagement.
Ironically (though not surprisingly), these reflections often catch up with me when I’m exchanging money here. It happened just a few days ago. I stopped by one of the local currency exchange places, which are commonly called “cuevas” here (literally, “caves” in English), to change some of my dollars. As the saying goes, a picture is worth a thousand words, so here’s a photo of the cash I got.
The image doesn’t do justice to the weight of this stack. Mind you, this is barely $150.
Just the other day, I also helped a friend exchange a much larger sum—several thousand dollars. We ended up with so many notes that he had to go back home to grab a backpack while I stayed behind to keep an eye on the cash. We packed it to the brim.
Doug Casey often talks about what happened in Germany in the 1920s. People used wheelbarrows full of cash just to buy a loaf of bread. It’s not exactly the same in Argentina, but you do feel like a paper millionaire when you stuff your pockets with thousands of pesos—way too much to fit in your wallet—just to cover a day’s expenses.
From Riches to Rags
You’re probably wondering, how did Argentina go from being the richest country in the world to 142nd in GDP per capita a century later?
To answer this, it’s key to know that while Argentina, like the U.S., has abundant natural resources, its past prosperity mainly came from free-market policies. These included sound money, low taxes, minimal regulation, and free trade. Things went downhill as Argentina turned its back on these proven economic policies.
The pivotal moment came in 1946 when Argentines elected Juan Perón, a military strongman who put the state at the center of everything.
He believed that heavy public spending, government intervention, and money printing were the answers to any problem.
Perón imposed strict government control and handed out freebies and welfare to the poor. That made him a lasting icon, but it changed the country’s moral fabric from self-reliant people to those who think they can get a free lunch by voting for a Peronist.
This doomed Argentina to a cycle of constant decline and economic crises. Perón’s followers, known as Peronists, get elected with promises of freebies, spend until they can’t borrow anymore, and then print money to fund even more spending. This drives up prices as the currency loses value. A mild reformer might then come in to fix things, but their reforms usually don’t tackle the root issues. Still, they cause pain and are unpopular, so people vote in another Peronist promising more “free” stuff, and the cycle starts again.
The result? An entire century of lost progress. The next chart shows how Argentina’s GDP per capita dropped compared to the U.S. since the early 1900s.
Today, Argentina’s GDP per capita is under 18% of the U.S. level, and around 57% of the population lives in poverty.
I’ve spent some time in the country over the years and always thought it was destined to repeat the cycle I mentioned earlier. That was until something major happened in November 2023.
On the 19th of that month, economist and self-described “philosophical anarchist” (but pragmatic libertarian) Javier Milei won the presidency of Argentina.
His promise? To put a chainsaw to Argentina’s bureaucracy and government waste.
Shockingly, it was Argentina’s young people who helped turn his presidential bid into a reality.
As many as 70% of voters under 29 backed Milei. This is a striking contrast to young Americans, who mostly lean socialist and vote Democrat.
It didn’t help that Taylor Swift fans, whose tour landed in Buenos Aires the week before the election, printed and plastered thousands of pink posters saying “Swifties Don’t Vote for Milei” all over bus stops and construction sites. To drive the point home, the bottom of the posters even had the hashtag “#MileiEsTrump” (Milei Is Trump).
But the Milei effect didn’t stop with just the younger generation.
Even older people who consider themselves left-leaning also voted for Milei. My Uber driver Pablo, who I met yesterday, is one of them. We had a great chat on our way to Casa Rosada, the Presidential house where Milei now works. Here’s a photo of us below that my wife snapped.
According to Pablo, no one in his family or close circle of friends is right-wing (which is how the media portrayed Milei), but they all voted for him. The only people he knew of who didn’t were either “sindicalistas” (union members), “subsidiados” (welfare recipients), or people working for the government. Basically, those without a job in the real economy.
The point I’m making is that the people of Argentina wanted change like a parched man wants water. And guess what, they got it.
Blood, Toil, Tears and Sweat
On December 10, inauguration day, Milei chose to deliver his inaugural speech on the steps of Congress in front of his supporters, rather than inside before its members. He said:
We have no alternatives and no time. We have no room for sterile discussions. Our country demands action and immediate action. The political class is leaving a country on the brink of the deepest crisis in its history. Each of them will have to take their responsibility.
However, our commitment to the Argentine people is unwavering. We will make all the necessary decisions to solve the problem caused by 100 years of profligacy of the political class. Even if it is difficult at first. We know that the situation will get worse in the short term.
[Skipping a few paragraphs]
So God bless the Argentines and may the powers of heaven be with us in this challenge. Thank you very much. It will be difficult, but we will do it.
This kind of un-politician-like honesty was what Milei built his campaign on, and it resonated deeply with the people of Argentina, who were fed up with empty political promises as they watched their country crumble. It was a breath of fresh air, which is why people like Pablo, who are neither young nor right-wing, voted for him.
Watching Milei deliver his speech, I couldn’t help but think this might be the first time in modern times we’ve seen “the people” choose to cut through the overgrowth of their government—and to hire a man with a chainsaw to get the job done, no less.
And it didn’t take long for the public to realize that this guy didn’t just talk the talk but also walked the walk.
On his first day in office, he abolished or merged half the federal ministries, laid off at least 50,000 state workers, devalued the currency by 50%, halted all public works, and slashed subsidies on fuel and electricity.
And just last June, Milei scored a huge legislative win in his quest to deregulate the economy when the Argentine Congress finally passed his “Ley de Bases” reform package, clearing the way for privatizing key state firms and easing labor laws.
"Experiment" That Won’t Fail
Javier Milei is no Trump, but he’s definitely the face of anti-establishment rebellion. So, they hate him with the same intensity.
From the moment Milei took office, establishment shills and mainstream media the world over jumped in with doomsday scenarios, predicting a catastrophic disaster for Argentina. They’ve been scoffing at what Milei is doing as an “experiment.” And they’ve been desperate to see it fail.
So has Milei failed?
Not even close.
Despite having a major currency crisis on his hands, with the peso inflating faster than any other currency in the world, Milei has managed to avert disaster. Since his election, inflation (on a month-over-month basis) has dropped to 4.3% in May, the lowest in two years. That’s down from nearly 26% in December, the month Milei was sworn in.
Real wages, after adjusting for inflation, have been rising across the economy as well.
Speaking of the economy, it grew by 1.3% in July. That’s well above the 0.1% median growth estimate from Bloomberg analysts. Year-over-year, it also beat expectations, rising 2.3% compared to their –2.5% forecast.
Now, you’re unlikely to hear about any of this in mainstream news, but then again, that’s not surprising.
What’s happening in Argentina is an unprecedented endeavor in free markets. If it succeeds, it could cast doubt on how things are run here in America and around the world. Proponents of big government, unlimited spending, and ballooning debt can’t have this, so they want it to fail.
We should all pray it doesn’t, for our own sake.
