What's Next?

So, the crazy guy won

worst boygenius album cover ever

Javier Milei, the crazy libertarian running for President of Argentina, has won the runoff against a center left establishment type and will take office in December.

What’s going on?

Third time’s the charm

I’ve already written about the election two times already so let’s get the easy part out of the way: the politics.

credit where credit is due milei picked a banger color for his party

Milei won by a lot, gaining around 56% of the vote versus 44% by his rival Sergio Massa; this would give him the biggest margin of victory in any Argentinian election since Juan Domingo Perón received 61.9% of the vote in 1973 (but no other results, except 2015, were in a two-way runoff, so kind of an unfair comparison¹). Needless to say, this is a histroically large victory. He won everywhere except the most hardline Peronist provinces (there’s one, Chaco, where a 5,000 margin of victory for Milei might flip to Massa under the definitive results), and received massive margins in most places.

Milei’s appeal is pretty simple: as Economy Minister, Sergio Massa was responsible for the state of the national economy, and other such inconveniences as widespread fuel shortages two weeks ago. The election was overwhelmingly about the increasingly high rates of inflation seen in the economy (such as the 12.4% monthly printing in August, and 12.7% in September), even moreso than issues such as crime or even other economic concerns. In such an environment with a single-issue campaign, parties representing “change” consistently received around two-thirds of the vote, while Massa and the left were stuck at a paltry 30-40%.

To clarify something I’ve seen frequently claimed, while it is true that Milei is big on social media (for example, he has 4.1 million followers on Instagram²), he’s also a creature of traditional media: I’ve known or heard about his TV appearances for over eight years, have heard about his Youtube or podcast episodes for five, and his movement has participated in electoral politics for four. So Milei is just as much Andrew Tate or Alex Jones as he is Tucker Carlson (who I think is the best match for his genre of individual overall - a resentful weirdo fascist).

His appeal comes, as I’ve said before, from the “Mittelstand” of Argentinian politics, the middle and lower middle class traditionally diputed by the two major party options. He’s also formed a sort of “extreme center”, a movement that transcends traditional political distinctions by amalgamating economic discontent and anti establishment ideas into a far right bloc independent of preexisting allegiances. He’s popular with the youth, mainly due to the economic opportunities that are put ahead of his reactionary values (which most voters, especially young, don’t share) - but is twice as popular with men than with women. Milei’s weird gender politics are doubled by the fact that he is loathed by women, and the gender skew of his supporters skirts the fact that he is an unmarried man with no children completely beyond normal gender norms, and instead considers himself a devoted “dog dad” (this part comes back I swear) in various casual arrangements with anonymous women.

Milei is a broadly defined reactionary, rallying constantly against “the left”, feminism, and the vague, amorphous, hysterical “gender ideology”. He is staunchly against abortion and his allies consider repealing any legal allowances for it a priority. He and his Vice President consistently deny the atrocities committed by Argentina’s military junta. Nonetheless, he describes himself as an “anarcho capitalist”, a libertarian, or sometimes a liberal (or liberal libertarian). His intellectual influences are the Austrian school of economics, a bunch of unscientific weirdo cranks, and Murray Rothbard.

Rothbard should be a massive red flag, since the man was a weird crank whose ideas about politics were both extremely dangerous and also should sound familiar. A self described libertarian, Rothbard believed that society was divided between “producers” and “parasites”, and that government was simply a scam for the latter to climb to the top of society and exploit the producers. He was a supporter of McCarthyism, and founded a “Students for Strom Thurmond” (Thurmond was a far right segregationist running on a platform of pure racism) group; his vision of society, ultimately, was that of gated neighborhoods policed by antiwoke death squads. So yeah, the new President of Argentina is a close follower of a guy whose ideology is “NDSAP Tax Cuts Caucus” and who believed some people are inherently biologically superior to others.

I’m not saying that Milei himself believes those things, but Rothbard is one of three people who’ve been honored to have a dog named after him, and Murray (the dog) is the one in charge of the economy³. I’ve previously outlined the dangers of having a weak, extremist president with little legislative backing: in a presidential system, the dual legitimacy of the two elected branches means that competing policy agendas can result in a difficult, perhaps even violent, confrontation. Obviously the median outcome, absent of compromise, is a completely gridlocked administration. But, given Milei’s authoritarian influences, you can have worse outcomes still, such as an Honduras-style institutional crisis, a Fujimori-esque autogolpe, or even an actual armed confrontation such as Russia’s Black October crisis (which happened, coincidentally, over disagreements regarding economic shock therapy). Lastly, Milei’s alliance with the traditional right (ex President Macri and former presidential candidate Patricia Bullrich endorsed him) is no guarantee that he’ll moderate.

One Trillion Dollars

Milei’s economic plan has also been the target of my criticism, mainly because it’s very stupid and doesn’t make a lot of sense.

In principle as its own, self-standing idea, dollarization doesn’t make a lot of sense: the core idea is to restrict monetary policy, so that the government cannot fund itself through the Central Bank. This obviously has the usual issue of not having control over monetary policy, which is kind of the whole point. But, importantly, dollarization is not at all sustainable without fiscal restraint, particularly a credible commitment to it. But if the Argentinian government could credibly commit to a low deficit, then it could reduce inflation with any other monetary arrangement besides dollarization.

Milei’s advisors know this, which is why they pitch dollarization as a cudgel for reforms, i.e. a way to receive political capital by lowering inflation. But this means that multiple, crucial reforms (such as pensions or deeper tax issues) might be delayed - Milei has signaled that he will not cut welfare until after stabilization, to avoid social conflict. Of course, this means something weird and problematic: Milei might end up in the same fate as his political godfather Mauricio Macri, tanking his entire presidency by putting the horse of macroeconomic reform behind the cart of stabilization. Not especially auspicious that Milei’s rumored Treasury Minister is Federico Sturzenegger, the man who crashed Macri’s monetary plans in 2017.

Dollarizing as a whole idea has a series of problems. Firstly and most importantly, you need dollars to do it, but if you have dollars then you can sustain any monetary arrangement you want. Secondly, dollarizing means that the country needs to sustain a positive balance of payments (not a trade surplus, shots fired at certain pundits) surplus, which means either a trade surplus (which the country is, to be fair, projected to have) or a financial account surplus, which would stem from investment. This investment would be both “productive” (IED) but particularly financial, as in borrowing - meaning that interest rates would have to rise, resulting in prolonged economic slumps. If the FX rate was overvalued (which is a possibility, since there would be a single discrete jump and then prices would adjust internallly) then you would need extra high interest rates. This is precisely what happened to Argentina’s efforts to control inflation with the “1 to 1” Convertibility Regime, which pegged the peso at one to the dollar and made the dollar legal tender - the country entered a prolonged downwards spiral after a series of global shocks made its already overvalued currency more overvalued, especially since interest rates had to rise to ensure continued funding for the public sector.

There is obviously the issue where dollarization would cost several billion dollars; at the current parallel market rate (a nice comfy 1,000 pesos per dollar), it would cost approximately 25 to 30 billion dollars to dollarize the country’s economy by cancelling out the Central Bank’s liabilities. The country has, in hand, negative 10 billion and a laundry list of creditors, starting with China (who Milei hates) and finishing with the IMF and other such organizations. Milei’s plan to dollarize ended up being the “Sam Bankman Fried” option, putting together a trust of government assets to sell to foreign investors - which would include not only the 16 billion of bonds, gold, and other assets with market value the government owns (plus another 70 billion of imaginary bonds the government paid to itself), but also the market value of several state-owned companies Milei is planning on privatizing immediately. Of course, who exactly would buy into this trust to pay for Milei’s dollarization is unclear, especially when his dollarization pointman has said they wouldn’t dollarize right away and redefined it to mean Convertibility (his boss was nicknamed “Javier Delay” over his tendency to push back his proposals, including extreme nonsense like school vouchers).

The last issue with dollarization is that adopting it would only come in the context of a crisis, and would inevitably entail a hyperinflation, as individuals would rush to lose every single peso in their possession and replace it with a dollar. Secondly, there would also be a large recession as a result of this, since real wages would drop precipitously versus the exchange rate. This slump would end, but be replaced by several years of USD-denominated inflation as wages restored themselves and relative prices readjusted; the alternative would be “internal devaluation”, a prolonged economic depression the likes of which only Greece can attest to.

Conclusion

So, Milei won, which is pretty bad. Not because I think him succeeding in his central economic mission (reducing inflation and reforming the public sector) would be bad, but rather, because I think he won’t succeed: shock therapy is risky not just economically but politically, and his extreme personality and ideological rigidity could lead the country to not just complete economic collapse, but also political and insititutional crisis as well. Hopefully it doesn’t come to that.

Also he’s a run of the mill social reactionary, which I never liked one bit.

1. Milei also largely overperformed vs Mauricio Macri’s 2015 win, who won by 2 points versus another Peronist dauphin, Daniel Scioli. Milei overperformed Macri’s vote share in every province (even his handslide 75% win in Córdoba, the third largest by population) except staunchly Peronist La Rioja and the City of Buenos Aires, a Macri stronghold (where Milei received half his national vote share in August and October - 15% versus 30%).

2. Comedically enough, he also follows 1,488 accounts

3. For clarification: Milei’s dogs (Milton, Robert, Lucas, and Murray) are all clones of his original dog Conan, who was allegedly Milei’s friend as gladiators in the Roman colosseum in a past live. Each dog channels Conan’ss spirit on different items of the agenda: Murray handles the economy, Milton does politics, and Robert helps with “seeing the future”. I don’t think the Son of Sam had such a detailed lore behind his dog seances.