The Milei ‘Miracle’ Is a Vindication of Free Markets

“Instead of talking about growth at Chinese rates, the world will soon be talking about growth at Argentine rates,” President Javier Milei of Argentina said in April. And here we are in July doing just that.

Argentina’s economy is growing at 7.7 percent, according to the latest year-over-year data. It grew by 1.9 percent in April, the most recent month for which data are available. The Chinese economy is growing at a rate of about 5 percent per year (if you believe the official statistics, which there are good reasons to doubt).

Argentina is achieving this growth not through a strategic industrial policy or a mercantilist trade policy. It’s achieving it by rolling back the overextended public sector, slashing the government budget, controlling the money supply, and removing price controls.

Milei eliminated rent controls in Buenos Aires, and the apartment market was flooded with new properties and the average real price went down. He turned a budget deficit into a surplus in his first full year in office. He eliminated half of the country’s cabinet departments.

When Milei took office in December 2023, inflation was 25 percent per month. In May, it was 1.5 percent. The initial shock of the policy change led to a spike in the poverty rate, but it has been falling since the second half of last year and is now lower than when Milei became president.

As is routine whenever a leader proposes shrinking government, “Over 100 Economists” signed a letter in 2023 saying that Milei’s policy proposals were “fraught with risks that make them potentially very harmful for the Argentine economy and the Argentine people.” When the Argentine people were subject to decades of statism that turned them from one of the world’s richest countries into an economic disaster zone, “Over 100 Economists” were silent. It was only when Milei, an economist himself, proposed to do something about it that “Over 100 Economists” found their voice.

It is common to refer to growth stories like Argentina’s as “miracles.” The Miracle on the Rhine was Konrad Adenauer and Ludwig Erhard’s resurrection of the West German economy after the Allied occupation ended. They were told by the professors and the social engineers that removing price controls immediately would be too big a shock. They ignored them and were vindicated with strong growth.

Poland is in the middle of its own “miracle,” which has made it a top-20 global economy, ahead of Switzerland and Taiwan. Leaders of post-communist Poland were told by the professors and social engineers that the free-market shock therapy of economist Leszek Balcerowicz would be dangerous, and then they were told they were fools for not joining the euro. They ignored them and were vindicated with strong growth.

Milei knows that these are not miracles. They may feel miraculous for people who have been suffering, but they are exactly what economic principles suggest would happen when government controls are removed and people are made free to buy, sell, produce, and consume as they see fit. People have known about this since at least the time of Adam Smith, yet they continue to be surprised when it works.

Milei will of course still face challenges. He has enormous damage to clean up. Midterm elections are upcoming, and one of his signature economic proposals, dollarization, has yet to be implemented. The powerful Peronist apparatus may still get its revenge.

Yet we are cheering for Milei, and we hope the world is watching. He has evangelical zeal for free markets, as illustrated in a speech to the World Economic Forum last year — talk about going into the belly of the beast — where he said, “If measures are adopted that hinder the free functioning of markets, competition, price systems, trade and ownership of private property, the only possible fate is poverty.”

If Argentina can become a byword for free markets, responsible fiscal policy, and supercharged economic growth, anything is possible — even a rejuvenation of those principles in the United States.

The Editors comprise the senior editorial staff of the National Review magazine and website.

Reprinted with Permission from National Review – By The Editors

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.