A wild chance for a push back against Russia, China and neo-statism
The potential election of Javier Milei, a registered capitalist, as leader of Argentina could mark the beginning of a takedown of the movement known fondly among socialists and alarmingly among neoliberals as a “pink tide” that has swept South America in recent decades.
Leftist reaction to the rise of Milei — routinely referred to in the media as a “radical” libertarian, or a “right-wing” libertarian, or even a “radical right-wing libertarian” — is one indication that he poses a real threat to the socialist cabals so enthusiastically backed by Russia and China and the global academic left.
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Among the big names hunting down capitalist Milei is anti-capitalist Thomas Piketty, France’s modern-day stand-in for Karl Marx. The Guardian reports that Piketty is co-author of an open letter signed by more than 100 leftist economists warning that Milei’s economic plan, especially dollarizing the Argentine economy, could prove devastating. “Javier Milei’s dollarization and fiscal austerity proposals overlook the complexities of modern economies, ignore lessons from historical crises, and open the door for accentuating already severe inequalities,” Piketty’s letter warned.
The letter’s focus on the need to learn economic history is a little rich coming from economists whose lefts-corporatist theories have helped plunge Argentina and much of Latin America into economic, fiscal and political hell holes. Government debt, manipulated exchange rates, political control of monetary policy, trade restrictions, industrial and personal subsidies and tax distortions, mass redistributions of money — all have contributed to Argentina’s current crises, including inflation hitting 143 per cent last month and heading for 200 per cent.
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That’s a monetary problem brought on in part by Argentina’s erratic central bank and debt-based fiscal policies. Milei, who describes himself as an anarcho-capitalist, comes off as a wild and even buffoonish character — he has been called Argentina’s Trump — but his plan to dollarize appears to have great appeal in a country in constant financial upheaval.
One of the leading proponents of dollarization is Steve Hanke at Johns Hopkins University. During a recent panel discussion Hanke summarized the history of central banking in Argentina. Since the 1950s, the country has suffered through eight peso crises, 16 recessions and assorted debt defaults (three since 2000) and numerous International Monetary Fund bailouts.
Hanke says it is time to shut down Argentina’s Banco Centrale, “mothball the peso” and install formal limits on government fiscal operations. In a recent working paper, Down with the Objections to Dollarization — They are Either Wrong or Irrelevant, Hanke summarized his position: “Dollarization is no purely theoretical idea. It already works well in more than 30 jurisdictions today, including Panama, Ecuador, and El Salvador among Latin American countries. None of them worry about triple-digit inflation or interest rates, the impossibility of trusting the local currency, or exchange controls. All enjoy monetary stability, which Argentina can also enjoy if it fully dollarizes.”
Judging by Milei’s popularity among voters, many Argentinians support the dollarization concept. The lack of support among some economists and activists internationally can be traced in part to larger global political and ideological objectives, including keeping the pink tide alive.
Key players behind the Argentina anti-dollarization movement are China and Russia, the leaders of the BRICS group of nations whose key objective is to counter the market-oriented dominance of the United States and the developed Western nations. BRICS members include founders Brazil, Russia, India and China, and South Africa, which joined in 2010. Their plan is to “knock the dollar off its throne,” as one headline put it.
At a BRICS meeting in August, invitations to join were sent out to other countries, including Argentina. The current Peronist Argentina leadership, which has long favoured a corporatist economic structure rather than free markets, welcomed the opportunity. Dollarization would reverse any plan to join BRICS, with Milei quoted as saying “he won’t make deals with communists.”
Chances that Argentina under Milei could become the centre of a global anti-leftist revival of some form of neoliberalism may not seem high. On the other hand, politicians and voters around the world may soon be more than willing to rise up in the face of obvious global inflation, trade and growth crises.
In the last few days, two leaders of the leftist economic establishment produced commentaries that suggest they are alert to a possible reversal of the pink tides. Piketty, in a commentary this week in Le Monde, said “It’s time for Western countries… to take the BRICS seriously.”
Piketty jumps through the China-Russia problem with a bizarre argument. “China’s political model increasingly resembles a perfect digital dictatorship, and no one wants it any more than Russia’s military kleptocracy. At least that guarantees the other leaders that the club won’t stick its nose in their business.” Piketty seems to be saying that by joining BRICS Argentina reduces the risk that China and Russia would invade?
Joseph Stiglitz, a leading economist on the interventionist left and a big backer of the BRICS, this week claimed global “victory” over inflation. “Disinflation has confirmed that the earlier price increases were ‘transitory,’ driven largely by supply disruptions and sectoral shifts in demand.”
In Stiglitz analysis, inflation took care of itself and all is well. Tell that to Canadians — or Argentinians who go to the polls on Sunday.
Financial Post
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