Argentina is recovering under Milei, no longer living off printing money and calling it social policy. By Martin Varavsky.

After more than two years of Milei, the international press still does not understand what is happening in Argentina.

The narrative abroad is “shock therapy, social pain, fragile coalition.” That frame misses the actual mechanism.

Argentina did not have a budget problem. It had a printing problem. From 2003 to 2023 the central bank financed deficit after deficit until the peso lost 99 percent of its value against the dollar. Annual inflation hit 211 percent in 2023. Half the country was poor. That was the floor. …

The fiscal deficit was eliminated for the first time in 16 years. Monthly inflation fell from 25 percent to low single digits. The central bank stopped printing to fund the Treasury. Country risk dropped from over 2,500 basis points to a fraction of that. Argentine sovereign debt, which used to trade like a default option, began behaving like normal emerging market paper.

Critics say poverty rose. It did, briefly, because removing price controls and subsidies revealed the real prices of energy, transport and food that the state had been hiding with debt. Once measured honestly, poverty has been falling fast. Real wages are recovering. Mortgages in pesos are reappearing, something that had not been possible in a generation.

Take note western governments, which are  increasingly going down the old Argentinian path:

This matters beyond Argentina. It is the clearest live experiment in whether a developed-style economy can be rebuilt by pulling the state out of places it never belonged.  Spain, Italy and France should be paying attention.

A country does not get poor because it lacks resources. It gets poor because its political class learned to live off printing money and calling it social policy. Argentina spent 80 years proving that. It is now spending two years proving the opposite.

Losers:

Milei dismantled the apparatus that fed millions through the subsidy route, the ghost jobs, and the activist posts. That sector isn’t going to be happy about an adjustment that cuts off their income. Milei’s merit is that the majority put up with it anyway.

Still turning around:

The recovery is uneven — formal sectors are rising, while informal ones and small SMEs are still down. The honest indicator isn’t the average; it’s the median in people’s pockets. The hard part is still missing: getting the adjustment to turn into private investment that pulls salaries up.

Commenters:

Milei’s policies is the shock therapy that Finland, France, Spain and several other European countries need. Its not reported, because its diametrically opposed to what politicians want to keep doing: increasing the size of the state. …

Our politicians as well as the puppet masters are scared shitless. So they prevent any positive news on Milei.