Milei, Argentina and Pakistan
ARGENTINA, in many respects, resembles Pakistan. Once the superstar economy of South America doing reasonably well, it has had to go through repeated economic turmoil through decades, making it a familiar patient in the IMF ward.
Against all odds, a person appeared on the horizon who came to dominate its politics. The surge saw him anointed as Argentina’s president a year ago. Since then, Argentina’s economy has witnessed a remarkable turnaround that few, within Argentina or outside of it, could have predicted. Take, for example, skyrocketing inflation that had inflicted untold misery upon its populace. In December 2023, it was recorded at 211 per cent; under Javier Milei, it has deflated to single digits (for perspective, recall the difficulties that inflation above 30pc inflicted upon the citizens of this country).
Other than that, his resolve to cut down the size of government along with eradicating regulations, which is being implemented, has appealed to many worldwide. Some in Pakistan have called for a Milei-like figure as an antidote to this country’s persistent economic malaise.
Do we need one?
Probable answers to this query come in the form of Milei’s extensive podcast with Lex Friedman. What follows is a brief take on the podcast and his thoughts.
Some in Pakistan have called for a Milei-like figure as an antidote to this country’s persistent economic malaise.
His best moments come when describing what he did to usher in an astounding turnaround in Argentina’s economic predicament. The whole answer is worth listening to, especially how he cut the ‘bureaucratic fat’ and ended fiscal deficits, leading to remarkably low inflation rates.
He is right in suggesting the positive impact of lower inflation and getting rid of price controls as the ameliorating loss of purchasing power, and thus lowering the chances of poverty, reflecting an excellent insight in terms of price controls creating a mirage of price stability.
Other insightful comments relate to discretionary transfers, the negative spillovers of taxpayer-financed contracts and works that spawn corruption and favouritism, corruption in the traditional media, and his appreciable opposition to stifling independent media platforms like X. In this context, if you put Pakistan in place of Argentina, it would be the same.
So while there is much to appreciate about his practical economic acumen, there is also the side of Milei which leaves listeners confounded and worried, if not agitated.
His worst moments come when he appreciates US and Israel as ‘liberal democracies’, revealing his revulsion to the Palestinian cause. It was astounding to hear this from a person who professes his love of freedom and pledges to die for the cause of freedom. Anyone with even an iota of sense, dignity and impartiality would acknowledge that both countries are anything but freedom-loving ‘liberal’ democracies.
This reprehensible bias is complemented by a questionable understanding of economic history and ideas. At the start of the interview, Milei harkens back to the questionable ‘Eurocentric’ view of the ‘hockey stick’ economic growth over the last 2,000 years. This is a one-sided, wrong view of history because it discounts the growth spurts under the Muslim empires, and even in medieval Europe where Italian city states enjoyed a higher living standard.
Another contentious claim of his is that the quality of life ushered in by the Industrial Revolution made citizens better off than the Roman emperors! Again, this is false. Life was prodigiously hard for most people during the Industrial Revolution. They worked endlessly in smoke-belching factories. Anyone who has read Charles Dickens will recall his depiction of English cities that paint a picture very similar to today’s Lahore. Unhealthy smoke would engulf the cities as a result of the sweat shops/factories running on coal, where even children and women would work up to 18 hours a day. Therefore, the claim of people enjoying a life even better than the Roman emperors is ill-informed.
His discussion of the Austrian school of economics, liberalism and Milton Friedman is also error-prone. For example, he quoted Friedman saying that he (Friedman) and Adam Smith were ‘classic liberals’. Well, one is not sure if Milei got the chance to read Smith — which is true of many people quoting Smith — but Smith also said things that were completely opposed to liberalism, like apportioning the largest portion of profits to labour rather than the capitalist. (Smith did not think of ‘capital’ as the original factor of production; rather, like William Petty and David Hume, he considered it accumulated labour). Just this statement makes Smith closer to Karl Marx than liberal philosophers like John Stuart Mill.
Similarly, his strong admiration for Murray Rothbard cannot account for the shortcomings in Rothbard’s and other Austrian economists’ theories, like their belief in Gold Standard and credit expansion leading to the Great Depression of 1929, when actually it was credit contraction — or ‘credit freeze’ — that turned the stock market crash to the Great Depression, while the Gold Standard — from the 1870s to World War I — was responsible for several episodes of curtailment of economic activity.
At other places, he negates himself, as in his advocacy of ‘dollarisation’, which would imply the US Fed controlling Argentina’s money supply (where’s the ‘freedom’ in that?) The idea of ‘currency competition’ is also debatable in historical context, and he does not explain its probable workings very well.
I suggest that when it comes to Pakistan, we do need the version of Milei that has a commendable grasp of the complexities and intricacies afflicting the economy. Only a man as unafraid of the status quo as him can chainsaw through the deep, intricate web of regulations and laws that stifle our economic potential as well as the lives of our citizens — to be fair, there are many amongst the ruling class here that have a superb understanding of the system’s intricacies. But many amongst them use that understanding to satisfy their rapacious monetary appetites.
What we do not want, though, is a side of Milei that is hostage to questionable biases and convoluted understanding of economic history and ideas.
The writer is an economist. His current research focuses on cost-benefit analysis of foreign-funded PSDP projects, economic reforms and history of economic thought.
Published in Dawn, December 7th, 2024