South Africans are, on average, poorer than they were a decade ago. Since 2013, the average wealth of South Africans has gone down in real (US$) terms 7.4%. Yet the world is, viewed as a whole, a much richer place, with average wealth per person increasing from $9,767 to $11,578 during the last decade, or 18.6%. Wealth across Asia went up by 42%, in the United States by 20%, across the European Union by 16.7%, in the Middle East and North Africa by 6%, and in Latin America by a comparatively miserly 3.4%. Only across sub-Saharan Africa was real GDP growth negative, at just under -1%, where economic expansion has not kept pace with demographic change.
Not only have people in South Africa been getting poorer, but much faster if matched against improvements in global wealth. Whereas their share of global per capita income was 60% in 2008, today its 50%.
This record places South Africa in the same growth ballpark as Argentina, which averaged -7.3% in the 15 years since 2008. The problem in Argentina was, according to the electorate, largely political; their response was to elect radical reformist Javier Milei as president in 2023.
Does Milei’s example offer options to others facing similar challenges elsewhere?
This is the second of a two-part account, the first of which was published yesterday.
Outside the sumptuous Four Seasons Hotel in Buenos Aires gathered a small if enthusiastic crowd waiting for the appearance of the Colombian rockstar Camilo, and hoping for the chance of a selfie and an autograph. Camilo, with more than 29 million Instagram followers, was another public personality who reflected how careers can be made via social media.
Inside was a less popular man, measured both in votes and likes, the trim figure of Mauricio Macri, the president elected in 2015 on a mandate of change, defeating the Perónist candidate Daniel Scioli in the first presidential run-off in Argentine history.
Macri, second from right, shares his thoughts [Image: Greg Mills]
A civil engineer and president of the Boca Juniors football club, the wealthy Macri became the first democratically elected non-Radical or non-Perónist president since 1916, and the last before Milei to prise power away from the fiscally catastrophic clutches of the Perónistas. To do so, in 2005, Macri created the centre-right Republican Proposal party, also known as PRO, which formed the Cambiemos political coalition in 2015 including the Radical Civil Union (UCR), and the Civic Coalition (CC).
Despite early hopes, the coalition did not last long, or long enough to carry out his agenda. He lost the election in October 2019 in the first round, becoming the first incumbent president in Argentine history to be defeated in a re-election bid. Macri offered the opportunity to reset a perennial to-and-fro, in-and-out-of-crisis political economy. Instead, he left office and the country with little more than an extra $70 billion of debt. Argentina still kept to its circle of populist overpromises, overspending, collapse, restructuring and, again, overpromising.
“I didn’t have the chance,” said the former president, looking older than his 66 years despite the twilight ambience of the Four Seasons, “or the skill,” he adds, “to reduce the fiscal deficit by even 1%. I would say to Milei that you have done incredible work, but it’s not just a question of beating inflation. You must show something more.”
Milei’s attractiveness and his message of radical, anti-establishment reform arise from popular unhappiness with how politics has contributed to the logjam of economic reform. Per capita income in Argentina between 1975 and 1990, for example, fell by 1.5% per annum, while the world rate expanded at 1.6%. According to a 2023 study by the Catholic University of Argentina, 43.1% of the population, or 17 million people, lived below the poverty line. Yet as many as 85% of Argentinians polled believe regardless that they are middle class, with the entitlements and expectations that go with this perception, whereas the figure is probably less than half of this amount, creating a tension which bubbles to the political surface when citizens don’t get what they expect.
Over the decade before 2023, according to figures from the World Bank, the economy shrank overall by 7,3%, and yet during this century the number of people on welfare in Argentina multiplied by 2.5 times. Something had to change, particularly as other regional economies – such as Chile, Peru and Uruguay – continued to grow by attracting foreign and domestic investment.
In admitting that “we have no problem except ourselves”, veteran lawmaker Richard Lopez Murphy says there are several reasons for the rise of Milei. The country had stagnated with a 123-year fiscal deficit “in which the old formula of spending with someone else’s credit card had reached its limits”. Milei came in with an ability to connect to voters, mastering social media, understanding his market in terms of levels of disaffection, unafraid of the political class (“as they won’t like him anyway”), and with obvious if eccentric authenticity and self-belief. As an outsider, he was able to take advantage of the local tendency to recycle figures across the political spectrum by offering a radical alternative. As such he was able to capitalise on his opposition’s weaknesses particularly “in having one big idea capable of being implemented quickly”.
Milei’s core idea was to reduce the state to a small rump to carry out essential tasks. “We think differently,” says Professor Martin Rossi, the Secretary of Deregulation in the Ministry of the same name. “We think from zero [in terms of the laws and bureaucracy Argentina needs]. We think from the basis of need.”
Over its 200-year bureaucratic history, Argentina has accumulated 700,000 decrees, 30,000 laws and 200,000 additional governmental regulations. Thus the state reduction process has two components: Deregulation, which includes reviewing and cutting or rewording regulations, employing a theory of “positive silence”, where if you don’t receive an answer to a regulatory requirement in a certain number of days, you become effectively the government. Around 1,000 laws had, by March 2025, been amended or scrapped.
The second body within the Ministry for Deregulation and State Transformation is that which wields the motosierra, in cutting government expenditure, privatising state-owned enterprises and slashing personnel numbers. The aim behind these cuts is to drive down expenditure while driving up speed and efficiency.
At the same time, these measures are supposed to reduce inflation and free up private sector growth. Coupled with an aggressive set of regulations to attract large-scale capital projects, known as the Promotional Regime for Large Investment (RIGI for its Spanish acronym), and a stated intention to liberalise the exchange control environment (known as the cepo) by January 2026, the plan is for the market to supplant the state.
It’s similar to the thinking of Donald Trump and his team, including Elon Musk, as they seek also to disrupt and shake up America and its international relations from which, in their belief, their country should profit more. It is summarised by Trump’s Vice President JD Vance, in emphasising an “America First” theme, contrasting Washington’s economic and foreign policy orthodoxy abroad and the struggles of those left behind in the American working class at home.
And there are parallels in the method. Milei, with six million Instagram and 3.8 million X followers, has been described by his officials as setting policy and running the government by X, not unlike Trump. Both are at times equally “savage” in pushing culturally as far as they can against perceived wokeism and conventional wisdom.
“The fundamental problem is not,” says Luis Lucero, the Secretary for Mining, “economic in Argentina, but a cultural problem. We have a very weak notion of what the law should mean – more of a suggestion than a law. As a result, the consequences for non-compliance are very relaxed. The term ‘accountability’,” he says, “has no Spanish equivalent.” Given that “the root of our economic crisis is in our relationship with the law”, Milei has embarked on Gramscian la batalla cultural (“a culture war”) supported by the disaffected youth, “fed up with old recipes based on the wrong diagnosis”.
Milei was quick out of the blocks in implementing his radical austerity drive, relying on the issuing of presidential decrees to change the government in the absence of sufficient support in Congress. By suppressing government spending, including firing 40,000 public employees and freezing budgets he was able to deliver Argentina’s first positive (non-deficit) budget in more than a century. While the public sector and unions bleated, unsurprisingly given the risk to their jobs and power base, his leadership style has so far proved both popular and surprisingly effective. But more will have to be done to consolidate the reform advantage.
The Presidential Guard … for the moment, against the deep state [Image: Richard Harper]
The Devil is in the Detail
With Milei’s election, the political pendulum swung wildly from one version of populism to another, from leftist Peronism to radical libertarianism. As a consequence, the chief selling point of the right – liberal prudency – has been overshadowed, even though that agenda is now owned by Milei.
Federico Sturzenegger, the Minister of Deregulation and State Transformation, and previously the Central Bank Governor, reminds that Milei inherited an economy running into hyperinflation, the rate increasing at 50%, or 17,000% annually compounded, and a 50% effective fiscal deficit. During the previous decade, two million Argentines had left the country “because they thought there was no hope… I think Argentines realised that if Argentina didn’t go for a dramatic change, we were going to all age watching our grandchildren over Zoom.”
The problem in Argentina was in the government “systematically” spending more than its income, Sturzenegger emphasises, which it had largely financed with debt or printing, both of which either led to painful episodes of debt default and restructurings or by printing money, which generated inflation. This had to change.
This “outsider from the political system, not constrained by interest, really with this obsessive view that you need to have a stable macroeconomic order for the economy to thrive, that you have to reduce the weight of the state, because everything that the state spends is something that you have to charge the citizens for … every dollar, every Rand, every peso that a state spends you have to charge citizens to finance that.”
Hence the radical cuts made across government. “In one month,” says Sturzenegger, “he cut government expenditure by five percentage points of GDP. He cut all the transfers to the provinces which had really kind of bloated their spending dramatically over the previous 15 years. He cut all public works because most of the public works were provincial and municipal, things that should be done at that level of government, not at the level of the national government ….” Together with the job cuts this effectively reduced the real wages of public servants.
“Once the government achieved the fiscal surplus, it stopped printing money to finance. And so inflation really dropped … down to 1.5% monthly.” The most important tax they reduced, as he terms it, is the “inflation tax − a machine of making poor people.” In the process, he claims that poverty fell in the first 12 months of Milei’s government from 57% to 33%, or some ten million people.
Milei faced many challenges to keeping his agenda moving, not least in the lack of power he has in the legislature, which explains his frequent use of presidential decrees to make changes. Another is in setting specific goals in deregulation, since getting rid of laws and people has not proved quite as easy it seems as promised.
Part of this stems from the ongoing horse trading between the federal government and the 24 provinces. Though he would like to cut their inflated public service numbers, some 2.5 million of Argentina’s overall four million, they are not on his payroll, so he has to resort to more sophisticated but no more subtle use of sticks and carrots on infrastructure budgets to encourage fiscal rectitude.
More than anything, he has to liberalise the exchange rate, narrowing the gap between the official and “blue” rates (about 30%), and in doing inspire confidence in the path of reform and facilitate inflows, and not just (as ever) from the IMF. It is estimated that Argentinians have perhaps as much as $500 billion in offshore stashes, which if repatriated would revolutionise the country’s finances. But they won’t bring their money back without guarantees that, this time, collapse will not, based on past form, follow reforms, no matter how meaningful and radical these might initially appear.
The upmarket Buenos Aires waterfront district, Puerto Madero [Image: Lyal White]
And he fundamentally has to place Argentina on a growth agenda, which would have to include reducing export taxes to incentivise greater production and also encouraging businesses to invest on a smaller scale than earmarked in the RIGI. This also involves carrying out − and not just suggesting – a privatisation process.
Even if the route to power has been daunting and the reform process started with zeal, much more will have to be achieved before Milei can be considered a success. “He has the advantage of being an outsider,” says Macri. “But if he loses momentum, he will suffer as an outsider.”
In Search of Other Nightingales?
Domingo Cavallo, Argentina’s finance minister who had brought them back from hyperinflation through convertibility, tells the story of Pedro Aspe, the noted finance minister of President Carlos Salinas in Mexico. Aspe wanted to visit Fangio’s museum in Balcarce and was “terribly keen” to meet El Maestro. Domingo called Fangio and all was arranged. Fangio himself picked up Aspe from the airport in Mar del Plata. When they were stopped for speeding on the way to Balcarce, laughs Cavallo, “the officer asked: ‘Who do you think you are? Fangio?’”
Time will tell if, like Perón, Milei’s brand of charisma will be enough to not only keep him in power but to allow his personality and process to obscure his agenda and goals. Even in an age when narrative is seemingly as important as reality, he will have to keep delivering on his promises while driving up growth and jobs and keeping down inflation. There is only so much runway to be bought by culture wars and political incorrectness. And there are always the Perónistas to fear; if Argentine history is anything to go by, they will not remain forever dormant.
Both Argentina’s transition and Milei’s legacy will require the same outcome, rooting out a way of thinking about the state and economic policy over successive generations. That’s no easy task in a country where the culture of profligacy and the tendency towards crisis is so deep-rooted as to be expectant, not exceptional.
To do all of this, Milei will need to build a formidable, generational team – which he scarcely has beyond his sister Karina, one adviser in Santiago Caputo nicknamed “The ‘Kremlin Magician”, and the Minister of the Economy – to provide the feedstuff for the success stories.
[Image: Richard Harper]
He also has to keep support from the right-of-centre parties, not difficult in philosophical terms (since he has eaten everyone’s ideological lunch), while keeping a close eye on the Kirchnerists with their predilection for stirring things among their supporters, from running legislative interference to ugly protest.
But the challenges will not only come from the left. As the political pendulum, inevitably perhaps, swings back, the centre around the likes of Macri and Horacio Laretta will too be positioning itself from any missteps on the part of Milei, which his personality and (lack of) depth of his advisory group might invite. It is certainly the case that Milei has a latent capacity to implode. That is just the way he is. And it seems unlikely that he will change.
“The biggest strength of Argentina,” says Macri, who is open about his frustrations in collaborating with Milei and in the process parlaying his parliamentary support to the president, “is that 75% of citizens realise that if they do not work, there is no future.” While he has relied on Macri’s bloc to get things passed, and otherwise used executive decrees, Milei does not accept advice easily. “If you want to be a leader, you have to have a team,” says Macri, whose own team were infamously at each other’s throats, at a cost to his administration. He accepts that Milei is “brilliant at setting the narrative, if sometimes a bit violently so, but 50-60% of his team have never met him which is incredible”.
It may be, as Lopez Murphy, a professor, economist, former economy and defence minister, and now parliamentarian, puts it, “(t)he only thing worse than Milei, is Milei’s failure”. His success will depend on much more than grandstanding, and early results, and on more than his personal authenticity and alternate, disruptor role and eccentricities.
José Godoy heads the Tucaman-based Foundation for Federalism and Libertarianism, where Milei, then a low-profile public figure, emerged as a political force in his first major public speech in 2014. He believes that Milei’s ultimate ambition was never to be president of Argentina but that it was just a stepping stone for a role as a “thought leader, a global influencer”.
To realise this ambition he will have to have ignited other nightingales through the power not only of his tune, but of his ability to permanently change Argentina’s direction.
*Special thanks are expressed to Alfonso Prat Guy, Matt Pascall, Lyal White, Daniel Herrero, Domingo Cavallo and Christopher von Tienhoven who assisted with various aspects of the visit.
[Image: https://www.flickr.com/photos/midianinja/53304116166]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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