At Astral Codex Ten, Scott Alexander tries to find something approaching the truth between the pantingly enthusiastic libertarian reports and the angrily negative progressive reports:
How is Javier Milei, the new-ish libertarian president of Argentina doing?
According to right-wing sources, he’s doing amazing, inflation is vanquished, and Argentina is on the road to First World status.
According to left-wing sources, he’s devastating the country, inflation has ballooned, and Argentina is mired in unprecedented dire poverty.
I was confused enough to investigate further. Going through various topics in more depth:
1: Government Surplus
When Milei was elected, Argentina went from constant deficits to almost unprecedented government surplus, and has continued to run a surplus for the past six months.
This wasn’t fancy macroeconomic magic. Milei just cut government spending:
- He eliminated 9 of 18 government ministries, including the Ministry of Culture and the Ministry of Women, Gender, and Diversity.
- He laid off 24,000 government workers (and hopes to increase that to 70,000).
- He cut fuel subsidies (paywalled link)
- He may have cut (or at least not increased, which given inflation levels is an effective cut) funding for universities, which now complain they have no electricity and are giving classes in the dark.
- He has changed the way inflation affects pensions in what was realistically a large budget cut.
- Et cetera.
This source says he cut the size of government by about 30% overall. Unsurprisingly, this eliminated the Argentine deficit.
[…]
6: Overall
When Javier Milei took office, he promised to do shock therapy that would short-term plunge Argentina into a recession, but long-term end its economic woes.
He has fulfilled his campaign promise to plunge Argentina into a recession. Whether this will long-term end its economic woes remains to be seen.
I think he gets credit for some purely political victories (completing the budget cuts he said he would complete), for decreasing inflation, and for improving the housing market. But in the end, history will judge him for whether his shock therapy eventually bears fruit. I don’t think that judgment can be made yet, and I don’t see many economists eager to go out on a limb and say that there are strong signs that his particular brand of shock therapy will definitely work/fail.
There are disappointingly few Milei prediction markets, probably because it’s hard to operationalize “he makes the economy good”. This multi-pronged mega-market has few traders, and weakly predicts a mix of good and bad things, maybe leaning a little good. But here is a more specific one:
… which compared to Argentina’s historical GDP growth rate seems — no, sorry, Argentina’s historical GDP growth rate is too weird to draw any conclusions.
And maybe the most important test:
