In Argentina, the crisis is coming to a head. Inflation of 70 to 80 percent is expected this year. But more and more Argentines are hoping for a more market economy to solve the country’s problems.
I was in Buenos Aires and other Argentinian cities from May 21 to June 1, speaking to economists, politicians, representatives of think tanks, journalists and young people. The situation in the country is dramatic. There is no country in the world that has declined as much in the last 100 years as Argentina. At the beginning of the 20th century, the average per capita income of the population was one of the highest in the world. The expression “riche comme un argentin” – rich as an Argentine – was a dictum at the time.
The ratio of real GDP per capita in 2018 to the same value in 1913 shows: Argentina’s ratio has barely increased and is the lowest ratio of any country for which data are available for both years. Inflation is particularly depressing.
When I pay for the hotel, I realize exactly what inflation means. I don’t want to pay with the Visa card, because with credit cards you pay the official exchange rate from pesos to dollars or euros. You can get twice as many pesos for a dollar on the open market – the state tolerates it. Argentines talk about the Blue Dollar. What is meant is the parallel dollar exchange rate of the US dollar in Argentina, i.e. the cost of buying and selling a physical dollar bill on the market. In fact, I’m told, things are much more complicated because there are at least four different types of dollars.
The state tolerates the existence of so-called “caves” (=caves) in which money can be exchanged. On the street you will be addressed by “arbolitos” (Spanish for “small trees”), i.e. by people who will show you the way to one of the many caves. Officially these are pawnshops or places to buy and sell jewelry or gold, but in fact they are blue dollar trading posts.
Argentines exchange their pesos there, hoping to get more pesos for those dollars a few weeks or months later. In a country with such high inflation, money has lost its function as a store of value and is only used as a means of payment. However, this is not always easy. You don’t always get the big bills in the caves. Only about a fifth of the 250,000 pesos that my interpreter and I have to pay for four days at the Sheraton in Buenos Aires we get in thousands. The rest in smaller banknotes. The payment process takes more than two hours
I ask why not use the money counting machine. But the people at the reception first have to check each individual bill for authenticity with a pen and count the money by hand. They keep miscounting. In the end, the money still goes into the money counting machine.
For Argentines, inflation is actually the norm. I meet Fausto Spotorno, chief economist at the Centro de Estudios Económicos of the consultancy OJF. He shows me an impressive statistic that Argentina has had at least double digit inflation rates almost every time since 1945 – with the exception of the 1990s when Carlos Menem pegged the currency to the US dollar, eliminating inflation for a decade but with negative consequences for export because the goods were no longer competitive.
Inflation is also the main theme of the libertarian movement around Javier Milei. The 51-year-old, who describes himself as an anarcho-capitalist, used to play as a goalkeeper for the football club Chacarita Juniors, later he studied economics and was chief economist at private financial consulting firms and government adviser.
In 2021, Milei was elected to the Cámara de Diputados de la Nación Argentina, representing the city of Buenos Aires, with 17 percent of the vote for the party La Libertad Avanza. Everyone expects him to run as a candidate in the 2023 presidential election.
I’m speaking to libertarian activist Lilia Lemoine, who is the vice president of Milei’s party. The very attractive 41 year old, who I would have guessed to be 30 at the most, is an actress, has many fans on social media and posts a sexy photo there, with a top that says “Libre Mercado” (free market economy) – with a fist.
Lemoine is filled with enthusiasm for Milei, who is formally honorary leader of the party while she is vice leader. She’s well known in Argentina, and when we go out to eat, the waiter wants to take a selfie. Milei’s followers are mostly young, poor and male, she says. The opinion that poor people don’t want to work and have become accustomed to government benefits, which is often heard here, is a lie: “That only applies to very few. Most would love to work, but the government, with its high taxes and regulations, doesn’t give them a real chance. These poor people are desperate, mainly because of inflation. They hope for our libertarian movement.”
That’s what’s special about Argentina: Desperate poor people in other countries are often more in favor of socialists and more government – or for right-wing extremists. Poor people who rely on more capitalism are not common in other countries.
Milei has attracted a lot of attention with a “lottery”: Anyone who fills out a form on social media takes part in a lottery in which they raffle their monthly salary as a member of the Cámara de Diputados. That’s 350,000 pesos, in May 2022 that’s about $1,800. Considering that the average income for an Argentine is around 60,000 pesos, that’s an attractive sum.
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In the first three months, according to Lemoine, two million Argentines took part in the lottery, with which Milei wants to show: “I didn’t go into politics for the money.” Every participant has to give their email address and phone number and I first think that this is a very cheap way to get the data for campaign advertising. However, Lemoine assures that the data will only be used for the lottery. Either way, it’s a very effective marketing technique.
I’m meeting with Congressman Ricardo López Murphy. He too is hoping for a turnaround in the market economy, but is not as radical as Milei, who wants to abolish the central bank, for example. López Murphy, who works with Germany’s Naumann Foundation, is an economist by training and served as defense and economy ministers during Fernando de la Rúa’s presidency. Since 2021 he has been chairman of the Republicanos Unidos party, which he founded in 2020 and is part of the JTC Juntos por el Cambio (Cambiemos) alliance.
He is also considered a possible presidential candidate. What would he do if he were in charge in Argentina? Above all, fight protectionism, dismantle the numerous regulations (e.g. in the labor market) and radically reduce taxes. Even companies with 200 or more employees are now being forced to sell some of their products at government-set prices. A big problem that he and others address: Because of the high tax burden, the informal sector, i.e. undeclared work, is extremely important. It is estimated that today more people work illegally than in official employment, says López Murphy.
López Murphy is considered one of the figureheads of the liberals in Argentina, another is José Luis Espert. Like Milei and Lopez Murphy, he is also an economist and consistently represents libertarian views. He has been a deputy in the province of Buenos Aires for the Avanza Libertad coalition since 2021. “We need a capitalist revolution,” he tells me. And he is optimistic: “Libertarian ideas are exploding in Argentina,” says Espert. Incidentally, Milei used to be a member of Espert’s party before founding his own party. What would Espert change in Argentina if he could? First, the topic of “freedom of trade” is mentioned, i.e. the fight against protectionism, deregulation, tax cuts. He also believes that several corrupt union leaders should be jailed to deter others.
I was surprised to meet three young women in Buenos Aires. They belong to LOLA, Ladies for Libertad. Valentina is 21 years old, speaks fluent English and appears very confident. She comes from the city of Mendoza and set up her own recycling company at the age of 13, which she officially founded when she was 18. But the first time was tough: “Every day robbers came to my company to take things from me. I called the police, they even came to the prison for a few hours once and then released them. The police don’t protect me. And the state takes away almost everything I earn with the extreme taxation.” And she doesn’t like the mentality of many compatriots who would rather live from the state than work themselves: “It’s so difficult to find employees,” she complains.
That’s how she came to the Libertarians. At 17, she joined Students for Liberty. At 19, she started her own libertarian group. The group grew quickly, many came because they did not agree with the government’s corona measures: “We had a seven-month curfew, you were only allowed to go out of the house for three hours on certain days to shop.” These measures have their group brought in.
They meet in apartments or restaurants and compare, for example, Marx’s Communist Manifesto with Hayek’s “The Road to Serfdom”. It is a women’s group that describes itself as “liberal feminists” in contrast to traditional feminists, who are mostly Marxist in orientation. Her hero is Javier Milei.
Adrina is 27 years old. She fled Venezuela because she was sentenced to prison after taking part in protests against the socialist regime. She studied law in Venezuela, but works as an IT programmer in Buenos Aires. She became politicized after her sister and brother-in-law were imprisoned after taking part in protests against the socialist dictatorship. Her parents fled to Peru because of the economic catastrophe, she now lives in Buenos Aires and is involved with LOLA here. It becomes clear to me: just as it is cool for many young people in Germany to be left-leaning, it is cool here to be libertarian. Even in Tucumán, a provincial city in the north where you see almost nothing but dilapidated houses and poverty, I give a lecture to 70 young people who attend courses at a libertarian think tank. They are anti-establishment, anti-state sprawl and hope more capitalism will solve their problems.
According to the “Süddeutsche Zeitung”, insurance brokers report that Allianz wants to get rid of hundreds of medium-sized companies by increasing prices by up to 400 percent. Property insurance, which companies use to protect themselves against fire, storm damage and business interruption, is affected.