Free Societies

Can economic freedom succeed in Argentina?

Argentina economic freedom
Brad Lips

Brad Lips | CEO, Atlas Network

This op-ed originally appeared in The Dallas Morning News.

Argentina, led by President Javier Milei, is making waves. Inflation in the country recently slowed for a second consecutive month, as Argentina’s government continues to slash spending and reduce regulation.

From scaling back subsidies for energy and transportation companies to privatizing state-owned enterprises altogether, Argentina’s new government seems intent on trusting the ingenuity of the free market — rather than a bloated public sector — to achieve fiscal balance. Another option now on the table is to gradually erase tariffs on exports, benefiting farmers who rely on the sale of corn, meal and processed soy oil to other countries.

Limiting government is the right step for a country whose public sector has routinely run amok. Over the last 123 years, Argentina ran a fiscal deficit in 113 of them. In 2020, the budget deficit surpassed 8% of GDP.

While Argentina recently saw its first monthly budget surplus in 12 years, there is still a long way to go. The annual inflation rate exceeds 200 %, the highest in over three decades. More than half of the country’s registered workers are government workers, while entrepreneurs are crushed by sky-high taxes and seemingly endless red tape. Argentines have long fled to nearby Uruguay to escape the heavy tax and regulatory burden, which got even heavier when the pre-Milei government hiked taxes on dollar savings and bank card purchases last November.

In Argentina, the tax-and-spend agenda has utterly failed. Nearly half of all Argentines live in poverty, hence why Milei called on entrepreneurs and other market-minded thinkers to push back against socialism in his speech at the World Economic Forum in Davos, Switzerland. In his words: “A successful entrepreneur is a hero.”

Milei’s message is provocative, both among the elites that attend Davos and constituencies inside Argentina which have not forgotten the “Dirty War” between leftist guerrillas and a military dictatorship that enveloped Argentina in the 1970s. Last weekend, protesters brought Buenos Aires to a halt to remember the human rights abuses that followed the military coup of 1976.

The challenge, not just for Milei but for all of Argentinian society, is to make a case for a shared future that transcends the resentments of the past. While these wounds run deep, the issues most relevant to Argentina’s citizens today relate to costs of living and systems of political patronage that inhibit the country’s economic vitality. Milei has a mandate to address these problems, but that mandate was not built only by himself. His efforts capitalize on decades of efforts by “ideas entrepreneurs” that have laid a foundation — brick by brick, project by project — for economic reform toward the free market and away from the failure of socialist regimes in recent decades.

In Argentina and other Latin American countries, civil society organizations are doing the hard work daily, making the case for free-market reforms that benefit employers, employees and job-seekers in their communities. Think tanks and “do tanks” are enacting change at the grassroots level via constructive policy solutions to pressing problems, garnering support for the concepts of individual liberty and limited government at the grassroots level, concepts now echoed by Milei and other political figures in the region.

Consider the organization Asociación Argentina de Contribuyentes (AAC), which united a multipartisan coalition to eliminate a monthly tax on credit card holders in Buenos Aires. Prior to AAC’s involvement, the city was charging local residents an additional 1.2% on their credit card statements, but the organization successfully worked with politicians on both sides of the aisle to return the tax’s proceeds to taxpayer, an unprecedented victory. The tax repeal amounts to $300 million in annual savings for three million people.

AAC, Fundación Libertad, Libertad y Progreso, and other organizations helped move the “Overton Window” — the range of public policy alternatives considered reasonable by the public — in the direction of freedom. Working with other local reformers, they made free-market thinking more palatable to Argentina’s people, and even Milei himself.

Therein lies a lesson for the rest of Latin America, where there is newfound optimism about the future of individual liberty (and rightly so). For free enterprise and economic prosperity to spread throughout the region after decades of authoritarian collectivism, change will need to come from the ground up.

What is most promising about the Milei case study is not the man himself, but rather the policy environment that aided his ascendance. If local freedom champions in other countries continue to focus on making similar progress at the grassroots level, broader reform will follow suit. Build it, and they will come.

Fortunately, there is a freedom movement beyond Argentina. In Peru, Centro de Investigación Looking is offering students and working professionals across Latin America free, on-demand courses on free-market environmentalism, reaching hundreds of regional leaders. In Brazil, Instituto de Estudos Empresariais continues to host its annual Fórum da Liberdade (Liberty Forum), attracting over 80,000 attendees and more than 400 speakers, including heads of state and Nobel laureates. Idea entrepreneurs elsewhere are building it, knowing that reform will come.

So, can freedom succeed in Argentina? And can it spread to other countries? If the grassroots are any indication, the only answer is “yes.”