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As he campaigned for president of Argentina last year, Javier Milei brandished a chainsaw as a symbol of the ferocity with which he intended to slash the country's massive public sector. Again and again he told voters that Argentina's economy had been wrecked by corrupt and irresponsible left-wing governments and warned that there was no easy fix to the chaos caused by decades of unaffordable state spending financed by endlessly borrowing and printing money. A trained economist, Milei outlined what he called his "Chainsaw Plan" — a drastic reduction in the cost and scope of the government and a frontal assault on the power of Argentina's entrenched political class.
The self-described "anarcho-capitalist" appalled his critics, who smeared him as a "wannabe fascist" and a "mini-Trump" whose simplistic solutions would wreak "devastation" on Argentina. But voters weren't deterred. They elected Milei in a landslide, giving him the chance to show what he could accomplish with a chainsaw and public support but very little parliamentary or institutional backing.
In his inaugural address on Dec. 10, the new president pulled no punches.
"We neither seek nor desire the tough decisions that will have to be taken in the coming weeks, but we have been left with no choice," he said. "There is no money [and] no alternative to austerity and shock. . . . It will not be easy. One hundred years of failure cannot be undone in one day." But if Argentinians would have patience, he promised, they would see that more freedom would revive what more government had only worsened.
It is hard to overstate how grim Argentina's situation is. Its inflation is the highest in the world. As Milei came to office in December, prices were soaring at a rate of 25 percent — per month. Over the past year, consumer prices in Argentina nearly quadrupled. To put that in context, inflation in the United States has been about 3.4 percent over the past 12 months — and Americans describe rising prices as the most serious problem facing the nation. In Argentina, by contrast, inflation hasn't been below 5 percent since the mid-1940s. It was in 1946 that Juan Perón and his wife Evita came to power, launching the vast expansion of government and control of the economy that gradually turned Argentina from one of the world's wealthiest nations to one that now ranks below Libya and the Dominican Republic in per capita income.
But Milei's counterrevolution has begun.
With chainsaw revving, he has already balanced Argentina's budget: Last month the country reported its first quarterly surplus in 16 years. The government has stopped printing money to pay its bills. Public subsidies for fuel and transportation have been slashed. So have payments to the provincial governments. The new president has eliminated 24,000 state jobs, slashed public sector wages, and frozen 90 percent of the country's public works projects. He devalued Argentina's currency, the peso, by 50 percent. That weakened the peso's buying power, but it undercut the black market that was adding to the economy's distortions.
In the United States, fiscal conservatives since the Reagan era have called for closing down government bureaucracies without ever managing to do so. Yet in just five months, Argentina's new leader has shuttered government agencies wholesale, doing away with — among others — the ministries of culture, infrastructure, and diversity. All told, 18 government departments have been reduced to nine, and the government announced this month that it plans to pull the plug on Télam, the state-run news agency.
As Milei warned, his "austerity and shock" campaign has caused great pain. An estimated 60 percent of Argentinians now live in poverty. Thousands of dismissed government workers are now struggling with unemployment. So are many of the construction workers who had been employed on government projects. "In real terms salaries have been set back 20 years," The Economist reported. Sales of prescription medications have dropped by 7 percent. In a country famous for its cattle, beef consumption is lower than it has been in decades.
Yet already the first hints of a turnaround are appearing.
Prices in April rose by just 8.8 percent — a two-thirds drop in the monthly inflation rate since Milei's inauguration. Traders are going all in on the Argentine peso, making it, incredibly, the best-performing currency in the world in investment markets. The International Monetary Fund, in a key vote of confidence, has endorsed Milei's austerity measures and reaffirmed a commitment to lend Argentina $792 million next month.
This is not, as Winston Churchill might have put it, the end of Argentina's troubles. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.
Milei has called for "a lot more chainsaw." Among the changes for which he is pressing is the authority to privatize state-owned corporations, like the national airline, water authority, and passenger rail service.
But his party controls only 15 percent of seats in the lower house of Parliament, and he has already been forced to accept deep concessions in the economic reforms he proposes. An omnibus package of 664 legislative changes was treated largely as a nonstarter; in the end just 232 of his proposals were approved by the lower house. Now Milei will have to take his proposals to the Senate and negotiate anew. The public still seems willing to give his program a chance to work, but how long will that support last if his opponents succeed in dragging out and watering down the transformations he says are essential?
Still, what Milei has achieved so far is astonishing. Presidential candidates in many democracies — ours very much included — make bold vows on the campaign trail only to backtrack in the face of criticism once in office. Milei has been fearless in defending his "chainsaw" approach, and he has not attempted to ease into it diplomatically. He understands that pulling up the old Perónist system by the roots is the only way to set Argentina back on a path to prosperity and growth.
Through it all, Milei keeps "making the argument," as Matthew Lynn wrote recently in The Telegraph. Underneath his brash style he is committed to serious economic and philosophical ideas — about free markets, individual liberty, and a smaller state. Like the economics professor he was for 20 years, he wants people to understand the case he makes for the efficacy of competition and the harms caused by overbearing governments. Everywhere politicians are addicted to subsidies, price controls, deficit spending, and corporate welfare. It is exhilarating to see a national leader who has a radically different vision and champions it unapologetically.
(COMMENT, BELOW)