Javier Milei and the Revival of the Austrian School of Economics

On November 19 2023, the Argentinian voted to depart from the socialist governance of recent administrations and elected the libertarian MP (and former TV star) Javier Milei as President.

A brash outsider and a controversial figure, Milei conducted his political campaign by wielding a chainsaw and an unconventional style of debate, surprising Argentina and the rest of the globe when he won the presidency. 

But the question remains: who is this man, and how has a once-popular school of thought in the economic sphere become revived anew through him?

 

From Carl Menger, Mises and F.A. Hayek to Murray Rothbard

 

The origins of the current tradition of the Austrian school can be traced to Carl Menger (1840-1921). Menger is best known for this contribution to what became known as the ‘marginal utility revolution’, where he showed that the value of a good is subjective and thus it is determined by its marginal utility, or the additional satisfaction gained from consuming one more unit of it. Further contributions to the school came from Ludwig von Mises and F.A. Hayek, a teacher-student duo who fought tirelessly for the ideas of liberalism in times of crisis and the ascension of collectivist forces in the faces of socialism, fascism and Nazism.

The former is best known for his books Human Action [1940] - a book considered the best defence of capitalism ever written - as well as Socialism [1922], and the latter for Road to Serfdom [1944], a book arguing that socialism/communism, national socialism [Nazism], fascism and ultra-conservative political ideas, have very similar backgrounds: all of them featuring centralization/nationalisation of the economy, restricted freedom of speech, and a disdain for the liberal democratic form of government. The result of adopting either one of those ideologies is always a system of tyrannical approach to how the people are governed.

Murray Rothbard was another economist significant to the development of the Austrian School, which he is credited with taking to the modern  mainstream of U.S. political life. Known as ‘Mister Libertarian’, Rothbard wrote numerous books, articles and academic papers on ideas such as abolishing the Federal Reserve, defence of the free market, taxation laws and the price system. Some of his best economic thought ideas are represented in his book  Man, Economy and State with Power and Market [1962], where according to the Mises Institute

From Rothbard, we learn that economics is the science that deals with the rise and fall of civilization, the advancement and retrenchment of human development, the feeding and healing of the multitudes, and the question of whether human affairs are dominated by cooperation or violence.

These figures shaped the ideas of the Austrian School of Economics, and its evolution over time. The school has offered the main alternative to Keynesianism in the 20th century, by focusing on human action, market interaction and rejecting state intervention and mathematical based models.

In the following portion of the article, I will showcase how Javier Milei took inspiration from all these figures and managed to return them - along with the Austrian School - to the forefront of Argentinian and international politics. 

 

The rise of Javier Milei to the Presidency of Argentina

 

If somebody would have told you - two or more years ago - that one of the largest economies in South America would elect a self-described anarcho-capitalist as head of state, you would think of them as crazy. But what had  existed  as a fantasy of some subreddit groups has ultimately come to fruition as Argentina converted the idea into a reality. But how to classify this man: is he a far-right fascist, a conservative populist, or a true libertarian?

At the time of writing this article, President Milei has been in office for about 4 months and has already made some of his reform policies from his campaign, but it remains to be seen what more he can achieve during his term. It will be a hard challenge to reform the country after decades of “Peronism”, a form of  populist socialism that ravaged Argentina for decades, with inflation averaging 206.2% from 1980 to 2022 and thus making it harder for the average citizen to acquire wealth.

Domestic Policy

In the case of domestic policy, Javier Milei has already implemented some much-needed reforms for the Argentinian economy. 

In what is wryly referred to as ‘shock therapy’, a drastic set of drastic measures that are meant to radically change the status of the economy in a short period of time have been introduced. This infers  the shocking or shaking up of the economy with sudden and dramatic economic policies that affect prices and employment. Price controls are lifted, publicly-owned entities are privatised, and trade is liberalised as part of it (Kenton). This year, for the first time in over a decade, Argentina has reported a surplus of  589 million dollars at the official exchange rate in their annual budget. Milei accomplished this by fulfilling one of his campaign promises: slashing the size of the government. In a famous short video on the internet, he is seen in front of a board with the previous government's ministries and removingmost, shouting “Afuera!” (out!). Some of these include: “Ministry of Tourism and Sports, Ministry of Culture, Ministry of Environment and Sustainable Development, Ministry of Women, Gender and Diversity, Ministry of Science, Technology and Innovation”. In total he disbanded 9 out of 18 government departments with one executive order.

Other important policies include his plans to dollarise the Argentine peso, closing the Central Bank (which he referred to as  ‘ a scam, a mechanism by which politicians cheat to the people with the inflationary tax’) while openly praising Bitcoin as a mechanism for payment, made by the private sector for the private sector, and ending a lot of subsidies, most notably the ones for the public transport totalling around 124 million US dollars. In regards to the influence of the Austrian School of Economics, these policies amount to a fascinating debate among key representatives and their followers. We can observe from how Milei has presented his views that he is a fan of F.A. Hayek (as he also welcomes the idea of private  banking) who has stated that: In the absence of any central bank, the strongest restraint on individual banks against extending excessive credit in the rising phase of economic activity is the need to maintain sufficient liquidity to face the demands of a period of tight money from their own resources. Even still,  deep-down as a libertarian Milei probably does not regard the FED too high, but even he realises that you can’t suddenly implement all of these ideas. In his ideal world the state would not exist, but as a politician and now in his role as President is to put in practice as many of these ideas as possible, even though there might be people who will say that he is not a true libertarian by taking this  ‘moderate’ approach in their views.

One of the best examples of  his “libertarian” policies is represented by what became of the housing market, most notably in the capital of Buenos Aires. Compared to what most progressives and socialist politicians would like to see done in regards to the housing market in their own countries, ie: rent control and tight regulation by state & central bank; President Milei has slashed all of that in his decree in December, a noteworthy part of his “chainsaw style of politics” ( a feature of his campaign trail intended as a metaphor to express in a distinctive manner the libertarian view on the size of the government). So what happened after this announcement would not shock most people in microeconomics university courses. By making it easier for people to sign contracts with their landlord, scrapping the 3 year minimum time of a lease and allowing individuals to use foreign currency for payment of the contract, the rent prices have fallen down by around 20% to 30% and the supply of housing has increased considerably (a 50% rise in notices for traditional rentals since the decree, noted by broker Soledad Balayan) - Borne.

Foreign Policy

When it comes to foreign policy, Milei has somewhat uncanny views. On one hand, he is probably the most Zionist leader in the world after the Israeli government leaders, vowing to move the Argentinian Embassy from Tel Aviv to Jerusalem, which he sees as the  rightful capital of the State of Israel. The reason for this move is not hard to comprehend: Milei is converting to Judaism, claiming he has been studying the Torah for a few years already. His first official visit to a foreign country as President of Argentina was to Israel, where he met with prominent Israeli officials such as Isaac Herzog, Benjamin Netanyahu and Israel Katz. There he promised to make efforts to declare Hamas a terrorist organisation, and pledged  Argentina’s support of the war in the Gaza Strip. He also visited Kibbutz Nir Oz ( the site of multiple atrocities committed on October 7th) together with President Herzog. Several hostages taken from the site are Argentinian citizens. Milei finished his trip with a visit to the Western Wall, where he participated in prayers.

Separately however, Milei has taken out Argentina from the process of joining the BRICS (an informal grouping of states comprising the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa, which seeks to establish deeper ties and cooperation between members on economic expansion, especially trade), on the basis that his government won’t have strong diplomatic relations with communist member states such as China and Russia. The cornerstone of this decision is presented by the fact that by being a libertarian/anarcho-capitalist, Milei would appear as a big hypocrite after winning the election to enter this alliance that its main objective is to challenge the supremacy of the liberal world order that is supported by the U.S & its allies and thus starting a new economic global of protectionism between the Western sphere of influence and the one lead by China and Russia. This decision represents a total u-turn from the previous government of Alberto Fernandez, and renders him the most avowedly pro-Western head of state in South America. 

 

Moving forward under Milei

 

Despite many publications such as The Guardian or The BBC are reporting, Javier Milei is far from being a fascist or a right-wing extremist. 

On one hand, as a libertarian, he is advocating for less state intervention in the economy and regards the individual more important than the collective, two positions unfamiliar to fascism. On the other hand, he does visibly hold conservative views - especially in regards to abortion. That is possibly the single most divisive issue in the current libertarian movement across the world (even though the poster child of libertarianism - Murray Rothbard - stated that “no being has a right to live, unbidden, as a parasite within or upon some person's body”), as it boils down to some people’s opinion that life starts at conception. Milei is opposed to abortion because he views it as murder, and also labelled the concept of  ‘’voluntary interruption of pregnancy’’ as ‘’a euphemism for killing the child in the womb.’’ This is attributed to his Catholic upbringing (Villar).

The fascinating thing remains if Javier Milei can succeed with his libertarian agenda in the upcoming years. If so, it might provide a blueprint for similar figures across the world to mimic his footsteps as financial problems are ever present in developing countries. We could see a shift to the right for most liberal parties in the whole world, thus the current of social liberalism might see a decline in its popularity among their members, as voters are becoming more interested in the economic policy of a candidate rather than his views on social issues. But it goes without saying that all of these aspects depend on how fast and well the economy of Argentina is going to recover in the upcoming years.



Bibliography

 

Lazar Berman, “In first bilateral visit, Argentina’s Milei says he will move embassy to Jerusalem” February 6, 2024

https://www.timesofisrael.com/in-first-bilateral-visit-argentinas-milei-says-he-will-move-embassy-to-jerusalem/

Will Kenton, “Shock Therapy: How it Works in Economics, Examples” September 11, 2023

https://www.investopedia.com/terms/s/shock-therapy.asp#:~:text=Shock%20therapy%20is%20an%20economic%20theory%20that%20says,the%20rate%20of%20employment%2C%20and%20improve%20living%20conditions

Julieta Villar, “Argentine President Milei: Abortion is aggravated homicide” March 9, 2024

https://www.catholicnewsagency.com/amp/news/257045/argentine-president-milei-abortion-is-aggravated-homicide

Ryan Borne “Argentina Offers a Textbook Study in Why Rent Controls Are a Bad Idea” January 22, 2024

https://www.cato.org/commentary/argentina-offers-textbook-study-why-rent-controls-are-bad-idea

Maximilian Health “Argentina's Milei signs decree to boost exports, deregulation” December 21 2023

https://www.reuters.com/world/americas/argentinas-milei-signs-decree-boost-exports-deregulation-2023-12-21/

Peter Jacobsen “¡AFUERA! Milei Leads the Way on Slashing Bureaucracy” December 14, 2023

https://fee.org/articles/afuera-milei-leads-the-way-on-slashing-bureaucracy

Agence France Presse, “Argentina Sees First Monthly Budget Surplus In 12 Years” February 17 2024

https://www.barrons.com/news/argentina-sees-first-monthly-budget-surplus-in-12-years-a148e46a

Mises.org, Man, Economy, and State with Power and Market | Mises Institute. [online] February 18 2024

https://mises.org/library/book/man-economy-and-state-power-and-market 




The views expressed herein are those of the author(s) alone. These views do not necessarily reflect those of LYMEC.

author

posted on

April 05 2024

Leave your comment

Recent Posts

Dialogues for Mental Health Week: Humanising the Discourse

This week is Mental Health Awareness Week, and in recognition of that, we at Libertas asked our readers to participate in our Humanising Mental Health

May 16 2024

Europe, Do You Still Remember Ukraine?

Ukraine.  Although this country's name rhymes perfectly with the word "rain," this country finds itself in nothing short of a storm. Think of any analogies you like: a sump...

May 14 2024

Redefining European Politics: The Rise of the Triad and Fall of Bipartisanship

Let’s talk about bipartisanship. This is a political scenario whereby only ...

May 03 2024