On the liberal tradition of Argentina and President Javier Milei

Take away

Due to its liberal constitution of 1853 and dependable noninterventionist policies between the 1860s and the end of WWI, Argentina enjoyed its most prosperous period yet.  By 1913 Argentina was a free market-oriented powerhouse and ranked among the world’s ten richest countries per capita with an advanced educational system and a comparatively well-developed infrastructure.

Regretfully after WWI and years of unstable, often military governments paired with guiding socialist principles and currency devaluations, by the 1930s Argentina overall began to decline. However, starting in the late 1950s, but especially during the last 50 or so years, a sophisticated network of free-market think tanks revived classic Liberalism in Argentina that eventually facilitated Javier Milei’s election victory.

Before he became president, Milei (53) was known for his somewhat unusual way of life, his clear-cut libertarian viewpoints, and as a TV personality. He taught economics at two universities,  founded a political party “La Libertad Avanza” and attracted young voters and open-minded intellectuals. While campaigning, Milei not only proposed a comprehensive overhaul of the country’s financial arrangements, its welfare/health systems, and its economic structure. He also made sure that he supported a liberal drug policy, fewer gun controls, and legalized prostitution and same-sex marriages, among other ideas. He advocates closer connections with the USA and Israel, favors active support for the Ukraine, and attempts to distance Argentina from its manifold geopolitical ties with China. The latter position is key due to the growing influence of China, Russia, or Iran in the area.

However, given the social, economic, and political shambles left behind by decades of corrupt Peronist rule, Milei and his government could easily encounter that widespread propensity of newly elected politicians to reverse their declared policies 9-10 months after assuming office, simply due to frustration.

 

I

The multiple variants of classic liberalism (in the European sense) have a fairly long, but  rather inconsistent tradition in Latin America’s larger countries. Probably due to the delayed reception of the European enlightenment philosophy in the region, the number of theoretical works produced by representatives of liberal thinking in Argentina, Chile or Mexico is comparably small. And yet most of these efforts must be considered important and some are pioneering.  A common aspect of this phenomenon seems to be, that most of the liberal thinkers in these countries, unlike their counterparts in Europe or the US, developed nearly all their ideas directly in response to the situations and political  challenges in their respective countries. These non-military intellectuals were primarily concerned with addressing institutional issues and also with pressing for specific political results but mostly without much systematic theorizing. In other words, most of them responded to the questions and problems that the social, economic and political situations forced upon them and developed their ideas in numerous legal commentaries, constitutional drafts or in the heated public debates that took place in pamphlets and newspapers.

Strongly influenced by the thoughts of Jean-Jacques Rousseau and also Voltaire,  liberal scholars such as above all Juan Bautista Alberdi (1810-1884) in Argentina, Jose Victorino Lastarria in Chile and Jose Maria Luis Mora in Mexico, roughly at the same time developed radical ideas about the replacement of the religiously grounded monarchical form of their respective governments with secular republics based on popular sovereignty. Together with several Argentinian friends, among them Juan M. Gutierrez, Alberdi founded the so-called ‘Generacion del ’37’. Inspired by Voltaire, this small but discreetly influential group of young liberal scholars actively opposed the brutal regime under Juan Manuel de Rosas‘ rule, from 1835 to 1852.  However, it was especially Juan Bautista Alberdi’s visionary work, which had the greatest impact. His book ‘Bases y puntos de partida para la organización política de la República Argentina’ (Bases and Starting Points for the Political Organization of the Argentine Republic), published in Buenos Aires in 1852, decisively and lastingly influenced Argentina’s liberal Constitution of 1853. In the same year Alberdi complemented this book with ‘Elementos de Derecho Publico Provincial Argentino’ (Elements of Argentine Provincial Civic Law) in which he compared Argentine’s earlier constitution with the US constitution of 1789. Alberdi’s thoughts of economic and political freedom, of free markets and unhampered international trade and immigration eventually led the country into a prosperous period roughly between the 1860s and the end of WWI when Argentina not only excelled as a powerhouse for mostly agricultural exports. By 1913 Argentina also ranked among the world’s ten richest countries per capita with an advanced educational system and a comparatively well-developed infrastructure.

II

However, Argentina’s overreliance on commodity exports and subsidies as well as the unsustainable government spending programs (an early form of Keynesianism) after WWI led to phases of political instability, civic decline, and an economic weakening. Several populist and socialist movements pushed most liberal thinkers to the political sidelines or into neighboring countries. The oligarchic nature of most governments during these years led to frequent interventions into the markets and the socio-economic order steered the country to tumultuous political times. Several coups followed and by the 1930s a military junta ended more than 70 years of successfully practiced Liberalism even under unstable governments. Antiliberal strategies paired with irresponsible economic and social policies and several currency devaluations caused Argentina’s rapid decline. Surprisingly yet, despite the Great Depression, WWII, and years of Juan Peron’s and the Peronistas’ left-leaning and partly fascist politics, Argentina had a higher per capita GDP than Italy, Japan, or Spain until the early 1960s. During the next several decades Argentina not only defaulted on its debt several times and struggled with raging inflations. Many liberal intellectuals also were corrupted and deserted their remarkable liberal tradition.

However, by the end of the 1950s, the renowned economist Alberto Benegas Lynch (1909-1999) founded the Center for the Study of Freedom based in Buenos Aires. This small think tank initiated a strong revival of the liberal tradition in Argentina. In 1977 he expanded the successful center into ESEADE (Escuela Superior De Economía Y Administración De Empresas), a private, small academic institution in Buenos Aires.  With the support of local but also international private sponsors, over the years ESEADE developed into a university dedicated to the teaching and research of the humanities and the socio-economic sciences, from the interdisciplinary perspective of the Austrian School of Economics. ESEADE’s Academic Advisory Council was initially chaired by Friedrich A. von Hayek (Nobel Prize 1974), and later by James M. Buchanan (Nobel Prize 1986) followed by Vernon Smith (Nobel Prize 2002).  Alberto Benegas Lynch, jun. served as EAEADE’s rector for over 20 years.

III

The classes, seminars, or single lectures taught by Ludwig von Mises, Friedrich A. von Hayek, Gottfried von Haberler, Max Count of Thurn-Valsassina or Fritz Machlup among other leading ‘Austrians’ raised a new generation of liberal scholars and practitioners in Argentina and beyond. Over time, they developed what is likely the most sophisticated network of free-market think tanks in Latin America. However, until Javier Milei announced his candidacy for president, the influence of institutions such as ‘Libertad y Progreso’ in Buenos Aires, ‘Fundación Libertad’ in Rosario or Fundación Federalismo y Libertad in Tucumán was a bit underestimated. Almost like Margret Thatcher explained some 44 years ago, the works of F.A.von Hayek contain the basic tenets of her guiding philosophy, in his campaign speeches, but especially in his acceptance address Milei quoted Alberto Benegas Lynch, Jun. as his intellectual hero. Accordingly, the motivating political model for Argentina’s new president  “… is the unrestricted respect for the life project of others based on the principle of non-aggression and the defense of the right to life, liberty, and private property” (Alberto Benegas Lynch, Jun.).

Throughout his campaign, Milei proposed to rapidly cut down the state operations in size, expand the role of the private sector, and revive civil society. Among other proposals, he suggested the closing down of Argentina’s Central Bank and the Dollarization; a significant reduction in public spending and taxes; a far-reaching elimination of bureaucratic obstacles; free markets wherever possible; the reform of public administration; labor sector flexibility and an extensive education reform that includes increased competition between schools and vouchers for them, amid other ideas.

IV

And yet, after Milei was elected president just a few weeks ago, Argentina woke up and asked itself which version of Milei would rule the country: Will he actually follow up on his famous chainsaw symbol and keep his impetuous manners displayed during his campaign? Will he realize his ideas as announced and continue to use rough language against the establishment? Or will he take on the responsibilities of his high office as a more thoughtful but shrewd, respectable, and moderate politician, who sensibly will stick to his principles? During his inauguration address, he already indicated that Argentina will see much more of his softer and mindful side.

Not only did he already concede that the immediate abolition of the Argentine Central Bank and the Dollarization of the currency ought to be postponed for the time being. The task of the central bank to swiftly bring down Argentina’s 143% inflation at least to a level that is comparable regionally and internationally is more urgent. For this herculean task, Milei nominated Joaquín Cottani and Santiago Basuili, two internationally renowned macroeconomists with extensive political and financial market expertise. Among his first acts in office was also the 50%+ devaluation of the Peso to reach an exchange rate of about 800 Pesos per US Dollar.

In record time, only a few days after his inauguration address, Milei presented his cabinet of only 9 ministers. By slashing the number of ministerial offices in half, from the former 18 to 9, he fulfilled one of his election promises. The newly created ministries for human capital or infrastructure bundle several responsibilities, which enable synergies between related duties, as well as the cost-saving combination of administrative assignments from different ministries. On the other hand, his liberalization measures are intended to eliminate tasks and thus make the authorities that were previously responsible for this, redundant, e.g. for price controls or foreign trade permits, etc. Although most of these measures are welcomed, they could also bring the potential for conflict. As a precaution, due to the difficult economic situation, he has already asked Congress to work hard in the deliberations and to forego the Christmas break.

Although Milei was not able to vest his entire cabinet with close confidants from his small and rather new party “La Libertad Avanza”, he has quickly filled key positions, such as the office of vice president with Victoria Villarruel (a lawyer with degrees from the University of Buenos Aires and NTU) and the influential office of the president’s cabinet minister with his sister Karina Milei (an artist with degrees from Universidad Argentina de la Empresa and the University of Belgrano). In the most important departments of Economics, Foreign Affairs,  Justice, Interior, Defense, and Security, Milei relied more on political experience and diplomatic skills. Thus he has named the economist and former investment banker Luis Caputo as his minister for economic affairs. Caputo’s expertise is urgently needed, especially in view of the difficult negotiations with the International Monetary Fund (IMF) and the existing dependence on bilateral financing (especially from China). As his foreign minister, he appointed an academic colleague, the internationally experienced Diana Mondino, who holds degrees from the University of Navarra (ARG), Columbia University, and Yale (US). Unlike her predecessor, Mondino favors the EU-MERCOSUR association agreement.  She seems well aware of the growing influence of China, Russia, Iran, or Hamas in the area.  One of Argentina’s most prominent lawyers, Mariano Cuneo Libarona became Minister of Justice and head of the Anti-Corruption office. The highly experienced former executive director of the Inter-American Development Bank, Guillermo Francos will be Minister of the Interior. Probably partly due to Patricia Bullrich’s immediate support for Milei after her defeat in the primaries and her equally immediate willingness to take on a ministerial office, which led Milei to appoint her as Minister of Security. The former governor of the state of Mendoza, Luis Petri will serve as Minister of Defense.

Given the social, economic, and political shambles left behind by decades of corrupt Peronist rule, let’s hope Milei will have the perseverance to prevail over that insidious ‘Iron Triangle’ of thriving bureaucrats, coalitions of organized interests, and vote-seeking politicians all trying to consolidate their power base.

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