High unemployment means cheaper services
And in other news: Argentina’s poverty rate jumped from almost 42% to 53% during the first six months of Javier Milei’s presidency (https://apnews.com/article/argentina-milei-budget-congress-economy-inflation-c83178217097093d476fab94429768a4)
Appeasing the market needs humans sacrifice! Once the rich get their fill, the poor will… anyway who cares about the poor.
I mean, I’m not advocating support for the guy but citing stuff that happens within the first 6 months of taking office is a bit disingenuous.
Things generally don’t happen immediately after someone takes power, there’s a lag before things start to happen and change. I would imagine that the increase in poverty would have happened no matter who was in power and whatever happened after that first 6 months could be attributed to milei more than what happened within the first 6 months.
Yes, because of austerity. You have to sacrifice spending somewhere to cool the economy and reduce the deficit.
The other way to go about it is to jack up interest rates sky-high, but that doesn’t fix the deficit.
You’re defending increasing the poverty rate because of a budget deficit. Are you aware that you’re trying to justify human suffering?
Because 200% inflation was so great
During the observation period from 1980 to 2022, the average inflation rate was 206.2% per year. Overall, the price increase was 902.38 billion percent. An item that cost 100 pesos in 1980 costs 902.38 billion pesos at the beginning of 2023.
https://www.worlddata.info/america/argentina/inflation-rates.php
How well do you think the population would fare if the government goes bankrupt?
Seems a bit early to tell if this will have much of a lasting effect. So-called economic “shock therapies” have a long history of working for a year or so, and then unraveling later. And especially for Argentina, the cycle of decades of growth followed by decades of recession has been going on for a while now. I’ll be genuinely impressed if he manages to actually fix the economy long-term, but that still remains to be seen.
Do you have examples of previous failed shock therapy attempts at economy?
This is a super comprehensive book on the entire topic.
General Pinochet’s rule in Chile is a good example:
In fact, when Milton Friedman—one of the principal architects of the so-called Chicago School of economics—traveled to Chile in 1975, it was still not clear whether Pinochet would fully embrace the Chicago School’s economic program. It was only after Friedman met personally with the dictator that Pinochet was persuaded to fight inflation with “shock treatment”—that is, steep budget cuts that would cause high unemployment but, Friedman promised, would also put the country on a more secure economic path.
Obviously, for neoliberals starving their own population to increase the imaginary numbers for foreign imperialist rentiers is more than acceptable, it is essential
Freezing investment into the country and nuclear grade austerity will always bring inflation to an almost stand still. You’re literally tossing liquid nitrogen on your economy, it’s absolutely going to freeze.
The IMF does not expect the Argentine economy to grow this year, but rather to decline by 3.5%, while it should start growing next year.
And this is the key aspect that usually makes people who consider this pause for a second. Because freezing your economy might solve the right now problem, it also has the ability to ice economic activity completely, triggering an economic depression. This is the “balance” so to say. The harder your freeze, the more you’ll need to rewarm the markets to get your economy going again.
President Milei and the government hope that the new laws, which offer investors decades of tax and customs relief, will quickly attract capital and curb the recession.
This has always been the super tricky part of the weapons grade austerity. The what comes after part. So Milei has done it, he’s cooled the markets and supply has nearly cratered in the country. The next steps is to get production back and start pesos in the country to start flowing again.
I’ve always been a bit irresolute about Milei’s approach on the economy. I’m not against it, it’s just a strategy that’s playing with fire in a gun powder factory. First and foremost, I hope that the people in Argentina find economic stability, because boy do they deserve it. So to that end I hope WHOEVER succeeds in getting that done. And second, I really hope this is something that can be long lasting. Hyper austerity has a history of bad boomerang effects. It can work, it’s just takes a ton of work, more than most governments are willing to invest. And so there’s a big chance that we could start to see some positive only to then watch it completely crumble once again.
If I was a leader, this isn’t exactly a strategy I would pick. There’s just a ton of places where it can go all wrong. But I hope the guy gets it fixed once and for all. But dang, I don’t know how dude is smiling in that photo because if I was going down this road I wouldn’t be able to sleep properly.
Here’s a fun one:
Neoliberalism: Oversold? – Finance & Development, June 2016 https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm
Finance & Development, June 2016, Vol. 53, No. 2
Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion
Milton Friedman in 1982 hailed Chile as an “economic miracle.” Nearly a decade earlier, Chile had turned to policies that have since been widely emulated across the globe. The neoliberal agenda—a label used more by critics than by the architects of the policies—rests on two main planks. The first is increased competition—achieved through deregulation and the opening up of domestic markets, including financial markets, to foreign competition. The second is a smaller role for the state, achieved through privatization and limits on the ability of governments to run fiscal deficits and accumulate debt.
[…]
•The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.
•The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
•Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.
[…]
Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment. The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic world and by former European Central Bank President Jean-Claude Trichet in the policy arena. However, in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality (Ball and others, 2013).
In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed. In the case of financial openness, some capital flows, such as foreign direct investment, do appear to confer the benefits claimed for them. But for others, particularly short-term capital flows, the benefits to growth are difficult to reap, whereas the risks, in terms of greater volatility and increased risk of crisis, loom large.
[…]
Moreover, since both openness and austerity are associated with increasing income inequality, this distributional effect sets up an adverse feedback loop. The increase in inequality engendered by financial openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting. There is now strong evidence that inequality can significantly lower both the level and the durability of growth (Ostry, Berg, and Tsangarides, 2014).
I thought he was another right wing populist demagogue but apparently there is method to his madness. I hope he pulls off this stunt perfectly and is able to land the plane.
