Barely a month ago, the received wisdom was that the Javier Milei experiment in Argentina had effectively collapsed. The self-styled ‘anarcho-capitalist’ president was elected in December 2023 after a campaign in which he waved a chainsaw at rallies, symbolising his promise to slash public spending and destroy the ‘political caste’. But with the peso on the slide, unions leading effective campaigns against the spending cuts and corruption allegations around his sister, the wiseacres – and polls – suggested that it was all about to cave in around Milei.
Milei’s La Libertad Avanza won 40.8 per cent in the midterm elections, widely seen as a referendum on his term so far
They’re not looking so wise today, after Milei’s La Libertad Avanza won 40.8 per cent in the midterm elections, widely seen as a referendum on his term so far. The Peronist opposition, Fuerza Patria, managed just 31.7 per cent. Milei has also been bolstered by a $40 billion (£30 billion) bailout commitment from president Trump.
From a British perspective, Milei’s thumping win is at once both hugely encouraging and also deeply depressing.
To start with the positives: it’s encouraging because the clear message from Argentina’s electorate is that if you treat voters as grown-ups they will (at least sometimes) respond as grown-ups. Milei’s uniqueness as a politician is that he has point blank refused to play the usual game, especially rife in Argentina but played here too, of effectively bribing voters who don’t pay taxes with public spending paid for by people who do pay taxes – and of bribing everyone with spending on the never-never, which always ends up with everyone being worse off.
Milei was written off largely because it was thought politically impossible for him to deliver on his campaign promises and be re-elected, given the scale of his reforms. On becoming president he abolished half of all ministries, devalued the peso by 54 per cent and deregulated almost all the economy, as well as limiting union power, lifting currency controls and preparing many public companies for privatisation. Inflation soared to 288 per cent by March 2024 after the devaluation – not that unusual for Argentina – but the medicine is working. September’s inflation was down to 2.1 per cent and there is now a fiscal surplus. It seems clear that Argentine voters have had had enough of make-believe politics and economics and are willing to stick with Milei and see if there really is a bright new dawn ahead.
But his win is also depressing, because there is no sign that British voters, let alone the government, are ready to grow up. For all the talk of Chancellor Rachel Reeves’ tough choices in next month’s budget, they are all in the context of carrying living in a fantasy world. The Office for Budget Responsibility (OBR) predicts that the interest payment alone on our debt will be £111 billion for 2025/26 (it will, as certain as night follows day, end up being more than that). It costs over 8 per cent of government spending to service our debt and it accounts for almost 4 per cent of our GDP. Seventy seven per cent of this year’s borrowing will be just to pay the interest on previous borrowing. It’s unsustainable, but there are no plans to even acknowledge that it is unsustainable, let alone to tackle it. Reeves and Keir Starmer could not even get their minuscule £5 billion benefit cuts through the Commons, despite their landslide majority.
Reeves’ solution to a shortfall in the public finances of £18 billion-£28 billion is to increase taxes still further and plunge us into an even deeper economic doom loop, rather than to consider why we are in such a mess.
Reform is no better, with all sorts of spending promises and unsustainable benefit pledges; they are as economically populist as they are in every other respect.
There is some hope: Kemi Badenoch showed in her Tory conference speech that she lives in the real world. Earlier in the year, she said that Milei’s reforms were a ‘template’ for what she would do in power.
Badenoch’s focus on restoring fiscal sense to the economy is the only way forward (although it needs to be pointed out that a party which still promises to uphold the pension ‘triple lock’ can hardly be described as pushing fiscal sense). The key question, however, is whether enough British voters will ever follow their Argentinian equivalents and agree.
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