Article by Adam Creighton, courtesy of The Australian
11.06.2025
Thank goodness Argentina’s charismatic, libertarian President, Javier Milei, didn’t listen to mainstream economists. He appears single-handedly to have revived his nation’s economic fortunes, after decades of misery, by doing precisely the opposite of what some of the world’s most eminent economists advised.
If only his reforms would be a template for our own political and economic elite, collectively addicted to ever more intrusive regulation and public spending.
Ahead of his election in November 2023, 170 economists from around the world, including such luminaries as France’s Thomas Piketty and India’s Jayati Ghosh, warned Milei’s supposedly “extreme right” proposals centred on slashing regulation and public spending would cause “devastation” and “social chaos”.
“A major reduction in government spending would increase already high levels of poverty and inequality and could result in significantly increased social tensions and conflict,” they wrote. His agenda was “fraught with risks that makes (it) potentially very harmful for the Argentine economy and the Argentine people”.
Milei’s administration slashed the number of ministries from 19 to nine, including departments of climate change, diversity and “social development”, insidious fonts of ridiculous regulations the world over. The turnaround in Argentina’s misfortunes has been stunning, even surprising his supporters.
In the second quarter of this year the economy grew 7.6 per cent, practically all of it an increase in GDP per capita given the nation’s relatively slow population growth. Milei has managed all this without resorting to the tried and failed method of endless deficit spending, actually overseeing a budget surplus in 2024 of 0.3 per cent of GDP.
Yes, there has been the odd street protest organised by militant unions, but they appear to have ignored the fact the poverty rate has declined sharply too, from 53 per cent in the first half of last year to 38 per cent in the second half. Even UNICEF, hardly a hotbed of libertarian thought, conceded in May that 1.7 million children had been lifted out of poverty since Milei took office.
“The disgusting liberals, the politically correct people, the ‘cool’ leftists, the ‘sensitive’ ones, those who love the poor so much that all they do is multiply them; they all would tell us that we were going to generate an explosion of poverty … the ‘insensitive libertarians’ lifted more than 10 million people out of poverty,” the President said when that data emerged.
His angry, mocking tone is understandable in a nation, once among the richest in the world, that had fallen to well below 50th by the time he won office after decades of socialist meddling.
Perhaps the most extraordinary results have occurred in the housing market. Milei abolished rent controls last year amid predictable fears those nasty landlords would jack up rents. On the contrary, supply of rentable dwellings almost tripled and rents actually fell.
Economists’ “open letters” have an ignominious history; beware economists acting in herds. In the early 1980s, when the UK was in a socialist quagmire not too different from what Milei inherited, 364 similarly eminent economists railed against the first-term Thatcher government’s plan to slash spending and temporarily lift taxes to rein in the out-of-control deficit. There was “no basis in economic theory or supporting evidence” for it, they thundered in The Times, predicting “social and political instability”. Almost immediately the British economy began to whirr back to life.
Who can forget the reassurances of the International Monetary Fund throughout 2006-07, as the world’s biggest banks were becoming absurdly leveraged, that the world was “in the midst of an extraordinary purple patch” and “world growth (would) continue to be strong” only months before the global financial crisis erupted.
In 2016 hundreds of professional economists in a flurry of public missives warned variously of an immediate recession, soaring unemployment, financial market panic and a housing crash, yet none of this things occurred. To be sure, Britain’s economy is now a shadow of itself but that’s hardly the fault of leaving the European Union.
In 2020 some 122 Australian economists in a public letter promoted the economy- and society-crushing Covid restrictions that mountains of empirical evidence have since suggested saved barely any lives, lumbered Australia with massive debts, and would never have passed an honest cost-benefit analysis. They denied “a trade-off between the public health and economic aspects of the crisis”, claiming it was a “false distinction”.
None of this is to smear all economists or economics; indeed, Milei was an economist himself. But it’s a reminder to beware conventional wisdom, and the inevitable tendency of economists in the modern era to have a bias toward bigger government, which often through academic grants, commissions and salary underpins their livelihoods.
Finally, for all the authority official macroeconomic forecasts enjoy in the media, they have a notoriously bad track record.
Brilliant macroeconomists can’t even agree on what causes inflation, perhaps the most fundamental question.
When Jim Chalmers considers the range of proposals for reform after his productivity summit, he shouldn’t be afraid to ignore the conventional economic wisdom that tends to beget more regulation. The example of Argentina should be a striking inspiration for a Treasurer genuinely interested in promoting Australian prosperity.
Adam Creighton is chief economist at the Institute of Public Affairs.
