As Argentina's presidential election on November 19 draws near, the election in this South American country is garnering global attention, particularly due to the radical economic policies proposed by candidate Javier Milei. Many economists view the election as crucial not only for Argentina's economy and its people but also as a potential threat to the international financial system.
On November 8, a group of 110 economists worldwide signed an open letter warning of the economic and social destruction that could befall Argentina if radical right-wing economist Javier Milei is elected president. The letter, penned by notable economists such as France's Thomas Piketty and India's Jayati Ghosh, received support from economists globally, including former Colombian Finance Minister and former UN Deputy Secretary-General for Economic and Social Affairs Jose Antonio Ocampo.
Argentina's economy is teetering on the brink of collapse, with two-fifths of its citizens living in poverty and an annual inflation rate nearing 140%. Milei advocates for measures such as abolishing the central bank, dollarizing the economy, and significantly reducing public spending. During his campaign, Milei has identified himself as an anarcho-capitalist and repeatedly claimed that "taxation is theft" and "the state is a creation of the devil, while God's system is the free market."
The recent open letter suggests that Milei's proposed economic vision, which ostensibly advocates minimal government intervention in the market, actually relies heavily on state policies to protect those already possessing economic power. Milei's economic approach, rooted in laissez-faire economics, is "full of risks and could cause great harm to Argentina's economy and its people."
The letter acknowledges the appeal of Milei's economic approach to the current Argentine populace, understanding their deep desire for economic stability given the country's frequent financial crises and persistent high inflation. However, while such seemingly straightforward and harsh solutions might be attractive, they could cause more damage in the short term and significantly limit policy options in the long run.
Proposals for currency dollarization and fiscal austerity overlook the complexities of modern economies and ignore lessons from historical crises, potentially exacerbating already severe inequalities. Significant cuts in government spending could worsen the already high poverty and inequality, likely leading to increased social tension and conflict.
This is not the first time economists have publicly opposed Milei. On September 10, a letter signed by 170 global economists claimed that Argentina's economic dollarization would lead to rising inflation, recurring economic recessions, and persistently high unemployment, without addressing the country's fundamental economic issues.
"We believe that dollarization is a misguided attempt to address Argentina's complex economic challenges," the economists wrote at the time, acknowledging that the prospect of a stable currency undoubtedly brings hope to the masses. "Evidence from abroad and the domestic situation suggest that dollarization is far from a panacea."
Regarding Argentina's current economic plight, the economists in the September letter believed it resulted from neglecting macroeconomic balance and "squandering the wealth of favorable trade terms and external financing conditions," a situation other countries in the region have successfully overcome. They warned that dollarization is a "mirage that must be avoided."
In response to the open letter, Milei took to social media. "170 failed economists, defeated in the classroom and in the real-world struggle against inflation, are now condemning the solution to the monetary scam. They oppose dollarization while saving in dollars and earning foreign income, which is hypocritical," he wrote.
With just over a week until what could be one of the most significant elections in modern Argentine history, observers note that the two main candidates appear evenly matched.
Although Milei rose to prominence with a first-place finish in the August primaries, he was unexpectedly defeated by the ruling party coalition candidate and current Economy Minister Sergio Massa by a 6 percentage point margin in the October first round, finishing second with 29.9% of the vote. However, Milei soon received support from the third-place candidate and former President Mauricio Macri. Milei and Massa are set for a second-round showdown on November 19.
Juan Cruz Díaz, Managing Director of the Buenos Aires-based consulting firm Cefeidas Group, noted that both candidates need to continue strengthening their images in the final stretch. "If you ask me, Milei has the advantage," he said.
