Tuesday, November 21, 2023

Expect Obstruction and/or Violence

Javier Milei has won the Argentine presidency, now he has to try to put into practice the radical changes on which he campaigned, and which not incidentally the country needs. This won’t be easy, it may not be possible.

Standing in Milei‘s way is over 70 years of Peronism, which author Christopher Sabatini calls “clientelism.” His definition is worth reading.

Argentina’s system of clientelism runs deep, and it’s not clear that Milei’s party can forge the necessary alliances to dominate the country’s federal system to pass and implement his radical remake of the country’s economy and politics.

An estimated 89 per cent of Argentines benefit in some way from the state’s generous public fuel and public transport subsidies, and social safety net programmes – not to mention public employment in bloated federal and state governments. Drastic cuts will have dramatic effects on living standards and economic growth in which state spending accounts for 38 per cent of GDP.

The image this evokes for me is to think of the Argentine government as a milk cow with too many attached to her teats and too few feeding her. In short, Argentines want much more government than they are prepared to pay for, a common enough problem. 

For 70+ years their politicians have solved this dilemma by printing pesos. These monetary units correspondingly became less and less valuable as prices rose and rose - classical inflation. Few Argentines have experienced another system.

Argentines are addicted to government subsidies which Milei promises to cut. Addicts are notoriously unwilling to see their supply interrupted. 

Don’t be surprised if the addicted manage to legislatively stymie his program cuts or if violence erupts when the subsidies and handouts end.