The Guardian’s worried Argentina is going to work
As we recall it the economic leaders in The Guardian are written by Aditya Chakrabortty:
The plan has been to engineer austerity, spike inflation and deepen poverty, then claim victory when falling prices lower poverty metrics.
Inflation means rising prices, which is hard to conflate with falling prices. On the other hand, if prices fall and wages don’t then real wages rise and poverty declines - which sounds like a fair enough plan to us.
The suggested alternative to the motoserra is:
Mr Milei could stabilise Argentina more effectively by taxing dollar export windfalls and saving the greenbacks in a sovereign wealth fund…..Better still: follow South Korea’s model of subsidies and currency depreciation, using its US alliance to reinvest export earnings in state-led industry.
Well, bright ideas all, obviously, but also the policies followed in Argentina these past decades. The very policies that brought Argentina to this pretty pass. It is possible - we make this just as a suggestion you understand - that doing more of what caused the problem but harder isn’t, quite, the solution to the problems caused by doing it in the first place. We’d even suggest that this isn’t even a matter of economics but just of basic logic.
We do not know that this was written by Mr. Chakrabortty but if it was we’d suggest it’s another of those examples of what can go wrong when the modern history graduates do the economics.
What’s economically rational is politically toxic to Mr Milei’s libertarian creed. Austerity isn’t buying time for industrialisation. It’s locking Argentina into a capital-friendly, resource-exporting model aligned with US interests. That suits the agro-export bloc that supports Mr Milei. Long a sick man of South America, Argentina remains trapped in low-value commodity exports instead of building high-value industry. Mr Milei sees the real cure – state-led green development – as worse than the disease. In chasing ideological purity and Trumpian favour, he deepens Argentina’s chronic instability and drags the IMF’s global credibility down with him.
Our diagnosis is that what really worries The Guardian here is that this will all work. For where would the progressives be if classical liberalism were shown - once again - to work?
Tim Worstall