Milei plants the order of capital and will reap social disorder – 01/11/2024 – André Roncaglia

One month into government, Javier Milei has already made it clear that his concept of freedom carries the authoritarian elitism typical of those who call themselves libertarians.

Its urgency decrees (DNU) and “omnibus” law propose to repeal almost a thousand norms and legislations that accommodated the conflict between wages and profits in the Argentine economy.

Unleashing the most draconian austerity, Milei went all or nothing. She has doubled down on the continued (and sterile) devaluation of the peso, released price controls and subsidies and seeks to break the wage floor with an anti-labor reform. Political institutions will slow down this process, but they will hardly be able to block it. Unemployment must advance as a way of “convincing” workers to accept permanently lower real wages.

Milei calls for the sacrifice of the working population while allowing business owners to mark up prices. In effect, profits combine with inflation —which is expected to reach 200%— to reduce the purchasing power of salaries.

Social well-being will collapse under the weight of price adjustments for energy, food and health plans (60% of the Argentine population depends on private healthcare). The combination of inflation of basic goods with greater job insecurity, increased taxes on income and foreign trade, as well as the widespread cut of social benefits and public works will lead to social upheaval.

Milei strictly follows the guide outlined by Clara Mattei, in the book “The Order of Capital”: it grants unrestricted freedom to capital and repression to the disobedient, triggering state violence and administrative harassment to persecute beneficiaries of social programs who do not accept its dictates. With the election won, here is Milei’s new slogan: “freedom is the carajo!”

Due to his lack of strength in Congress, Milei considers the David Cameron solution: popular plebiscites. He got it wrong with Brexit and he will get it wrong with his neoliberal bus, as severe adjustment leads to the collapse of state functions, sowing chaos.

Recent article by Maria Haro Sly points out how Milei’s forced errors restrict her options. As the Argentine government does not issue a convertible currency, the more currencies that are accepted on the international market the Central Bank obtains, the less volatile its exchange rate will be and the smoother the internal adjustment.

His Sinophobic bravado not only led to China’s refusal to renew the $6.5 billion loan, it could reduce Argentine exports to China and therefore the inflow of dollars into the country. By rejecting membership in the BRICS, Milei deprives Argentina of a large amount of resources to stabilize its economy and reinforce its infrastructure.

Stephen Kaplan shows, in “Globalizing Patient Capital: The Political Economy of Chinese Finance in the Americas”, that China’s external financing is more stable and charges interest rates much lower than those that the IMF demands of the country for the monstrous debt of US$44 billion, contracted in 2018 by liberal Maurício Macri.

Chinese “patient capital” gives national governments more room to maneuver in formulating domestic policies. Long-term risk tolerance and a lack of political conditionality allow developing economies to circumvent fiscal austerity trends imposed by multilateral organizations.

Ignoring changes in international finance and geopolitics, Milei throws himself into the lap of the IMF. Generating a 2% surplus in 2024 — in exchange for just US$4.7 billion — could violate the threshold of social tolerance for the use of state violence as a tool for macroeconomic stabilization.

Milei is inspired by Macri, but could end up like former president Fernando De La Rua: fleeing the Casa Rosada on board a helicopter.

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