One Year of Milei: The Reality of Radical Austerity

Just over a year ago, Javier Milei was sworn in as the 59th President of Argentina, promising to combat inflation, but warning that there was “no possible alternative to austerity.” Milei, a libertarian economics professor and conservative TV pundit, shocked observers and disrupted the political status quo when he won 56 per cent of the vote in the 2023 Argentine presidential election — and the largest number of votes in Argentinian history. In 2023, Argentina was facing an annual inflation rate of 211 per cent, a poverty rate of nearly 40 per cent, and a weak currency, meaning that Argentinians had to pay more for imports. In response to widespread public frustration, Milei pledged to “begin the reconstruction of Argentina” through a set of radical libertarian economic policies. While the results of economic policy are often not immediate, it is important for voters, both in Argentina and abroad, to ask one year later: how did Argentina get here? And have these radical policies worked? 

Prior to his presidency, Milei had minimal experience in government, only serving for two years as deputy in the Argentinian lower house of Congress. In high school, Milei was nicknamed “El Loco,” the madman, for his aggressive persona. He reinforced this reputation as a pundit, nicknaming himself “General Ancap,” a reference to his anarcho-capitalist beliefs and fierce anti-establishment rhetoric. On the campaign trail, Milei appeared at rallies with a chainsaw, a figurative display of his commitment to slashing state spending. The anti-establishment fervor that defined the Milei campaign resonated with Argentina’s frustrated youth; 70 per cent of voters under 29 supported him in the election. Milei’s opponent, Sergio Massa, the former Minister of the Economy, was associated with the inflationary policies of the Alberto Fernandez administration. In contrast, Milei’s defining promise was to drastically cut state spending across the board. He also pledged to cut taxes, reverse protectionist measures, limit foreign exchange restrictions, abolish the Central Bank, and potentially dollarize the economy. Seeing the widespread public anger with past leadership, Milei branded himself an economic populist by promising rid the government of the “political caste.” 

Understanding Argentinian history is essential to understanding Milei. At the start of the 20th century, Argentina was one of the ten richest countries in the world on a per capita basis. In 1930, as the Great Depression rocked the Argentinian economy, the military orchestrated a coup d’etat. Argentina continued to suffer numerous coups d’etat over the next decades, resulting in political instability and inconsistent economic policy. The country began to experience a pattern of economic decline in 1950. Historians attribute this to various factors, including political instability, poor trade and manufacturing policy, excessive government spending, and the accumulation of immense foreign debt. Simultaneously, many administrations, notably that of Juan Peron, pursued policies of Import Substitution Industrialization (ISI) until the 1970s. ISI advocates for protectionist policies that incentivize domestic production, with the goal of subsidizing local manufacturing industries and achieving economic self-sufficiency. However, this caused Argentina to lose its competitive advantage in agriculture (which had once made the country rich) and surrender gains from free trade and foreign direct investment. To afford these policies, Argentina printed and borrowed money extensively. As a result, since 1980, Argentina has experienced hyperinflation and defaulted on its debt eight times. Given this history of economic mismanagement, the popularity of Milei’s untraditional agenda is unsurprising. 

Over the last year, Javier Milei has steadfastly pursued his libertarian economic agenda. Though restrained by an opposition-controlled Congress, Milei has managed to implement some unprecedented economic reforms. In his first month, Milei halved the number of government ministries, citing bureaucratic inefficiency. Milei’s administration has paused subsidies for energy and transportation, and new infrastructure projects were halted, costing tens of thousands of construction jobs. While all budget cuts come with social costs, some of Milei’s reductions have had an especially widespread impact. Painful austerity measures — such as raising public sector wages and pensions slower than inflation — lowered incomes for many, given that 10 per cent of the population is employed by the state. Milei’s decision to veto a bill to match university funding in line with inflation, essentially cutting university salaries by 40 per cent, was met with intense opposition from university students. Salaries have dropped by similar percentages in the country’s healthcare, scientific research, and culture sectors. Altogether, Milei has successfully cut state spending by approximately 30 per cent. To the surprise of many voters, however, Milei has committed to raising defence spending from 0.5 to 2 per cent of GDP and agreed to retain Argentina’s national airline, post service, and public media.  

Inflation decreased in 2024 by 93.6 per cent. In November 2024, monthly inflation dropped to 2.7 per cent, the lowest level seen since before the COVID-19 pandemic. Argentinians are more optimistic about the economy than they have been in the last 10 years, with 41 per cent saying the economy is improving compared to 25 per cent in 2023. The same Gallup poll found that 53 per cent of the public says their standard of living is improving, in great part due to lower inflation. In tandem with lower inflation, Argentina enjoyed its first budget surplus in 14 years, at 0.3 per cent of GDP. Moreover, the national public sector experienced nine months of continuous fiscal surplus, something not seen in more than 16 years. Milei’s economic accomplishments — lowering inflation and producing a budget surplus — are extraordinary in a country known for its historical struggles with inflation and deficits.

Success in these metrics comes at a cost. In Argentina, this cost is felt painfully by seniors, students, and lower-income citizens. The drastic cuts in salaries and pensions, as well as reductions in welfare programs, have seen the poverty rate jump to 53 per cent — the country’s highest in 20 years. Mass layoffs and reduced government expenditures have created a pessimistic job market, with 69 per cent of the public saying it is a bad time to find a job. Ironically, many of the groups most affected by Milei actually voted for him. According to AtlasIntel, a Brazilian polling firm, over 56 per cent of “very low income” voters supported Milei in the 2023 election, in contrast to only 43 per cent of the “very high income” demographic. A slight majority of university-educated Argentinians backed Milei too. 

A year after his election, Milei’s approval rating hovers around 45 per cent. Under Milei, poverty has risen, but he has tamed the behemoth of inflation. Steadier prices make financial planning easier for Argentinians, even those on the edge of poverty. The measurability of inflation reduction, both in the media and in store prices, contributes to a sense that Milei’s policies are working. International coverage and Milei’s popularity among global right-wing figures foster a sense of “international fame,” which seeps into domestic public opinion. Despite the painful costs of austerity, many Argentinians would like to see Milei push forward with his agenda — including those who the policies harm the most.

In the United States, right-wing figures have looked to Argentina as an inspiring case study on the effectiveness of radical anti-inflation policies. Javier Milei was the first foreign leader to meet Donald Trump after his electoral victory on November 5, 2024, with Trump calling him his “favourite president.” Meanwhile, key Trump allies such as Vivek Ramaswamy and Elon Musk, have praised Milei online. These fans are quick to overlook the consequences of Milei’s policies and confident to assume that the policies are applicable elsewhere. 

In reality, Milei’s “shock-therapy” approach followed logically from Argentina’s unique history of hyperinflation, debt defaults, and excessive spending; extreme circumstances sometimes necessitate radical action. Milei’s bold economic policies may have tamed Argentina’s inflation, but their harsh societal toll serves as a cautionary tale: radical measures for unique crises shouldn’t be mistaken as one-size-fits-all solutions.

Edited by Grace Hodges