Milei: what is the Austrian School that inspires Argentines – 11/20/2023 – Market

“I consider the State as an enemy” is a phrase from the elected president of Argentina, Javier Milei, who sums up his economic thinking in six words.

A self-declared libertarian, Milei won the elections this Sunday (19) promising to drastically cut public spending, deregulate the economy, privatize state companies, close the Central Bank, reduce taxes, eliminate severance pay and, ultimately, dismantle the foundations of the system. Argentine economy.

All are radical measures that represent a 180° turnaround in the politics and economy of a country in crisis.

The total dollarization of the economy, one of the proposals that caused the most interest and controversy inside and outside the country, has become the emblem of an economist who calls himself a “market anarchist” and despises the devalued Argentine peso. “It can’t even be worth excrement,” he exclaimed, referring to the Argentine currency.

But where do Milei’s economic ideas come from? He admits to being a devotee of the Austrian School of Economics, a current of thought founded by the Austro-Hungarian Carl Menger at the end of the 19th century. We explain who he was and what his economic principles were.

The “Austrians”, who, despite having different nationalities, kept the nickname of the place of origin of the theories, believe that individual freedom is the basis of economic progress. This means that economic decisions must be made by individuals and not by the State or any other central authority.

“Today the end of Argentine decadence begins. The impoverishing model of the omnipresent State is coming to an end”, declared Milei on Sunday night when celebrating the victory over Sergio Massa, Minister of Economy and fervent defender of the role of the State.

Milei attributes the country’s economic crisis to the State and the high inflation and devaluation of the peso to the Central Bank, proposing the dollarization of the economy as a solution.

Although it remained within a narrow circle of followers, the Austrian School attracted renewed interest in the 1970s, after Friedrich Hayek received the Nobel Prize in Economic Sciences in 1974.

What generally unites Austrian followers is their rejection of Marxist, Keynesian, monetarist or neoclassical economic theories, and their adherence to the idea that economic science derives from philosophical logic, making it possible to develop solid economic theories based on fundamental logical principles.

Anchored in these premises, his followers fervently defend the free market and private property.

Who is Murray Rothbard, Milei’s guru

One of the greatest exponents of the Austrian School is the American Murray Rothbard, who is credited with creating the term anarcho-capitalism in the 1950s.

Anarcho-capitalism, praised by Milei, is a philosophical-political-economic vision that emerges from the roots of the Austrian School and proposes the complete abolition of the State in favor of individual sovereignty through private property and the free market. Rothbard articulated his ideas and, in 1971, founded the Libertarian Party of the United States.

“True anarchism will be capitalism, and true capitalism will be anarchism,” stated Rothbard in an interview published in The New Banner in 1972.

Two decades later, after the end of the Cold War, Rothbard left the Libertarian Party and defined himself as a paleolibertarian.

Developed by Rothbard and Lew Rockwell, paleolibertarianism is a libertarian current that adds a conservative cultural perspective to the economic vision.

In this way, an unprecedented political alliance was created between economic libertarians and American conservatives, considered an electoral strategy designed by Rothbard and Rockwell to attract voters from the Republican Party.

This alliance supported paleolibertarian Republican candidate Pat Buchanan in the party’s primaries against George Bush, who ended up prevailing and winning the 1992 presidential election.

At that time, Rothbard wrote the essay “Right-Wing Populism: A Strategy for the Paleo Movement”, endorsing the use of populism with the strategic goal of expanding libertarian ideas, while Rockwell contributed religious support to sustain conservative values ​​around traditional family as the basic unit of a free society.

For some researchers, paleolibertarianism and its right-wing populist strategy have resurfaced today with political leaders such as Donald Trump, Jair Bolsonaro or Georgia Meloni, each with their own style.

From this perspective, Milei would be the Argentine version of American paleolibertarianism, which, through his running mate, Victoria Villarruel, incorporates ideas from the traditional Argentine right, such as Catholic nationalism, opposition to abortion and proximity to militarism.

How did Milei become anarcho-capitalist?

In the early years of his career as an Economics student at the University of Belgrano, as well as during his postgraduate studies at the Institute for Economic and Social Development (IDES) and the Torcuato Di Tella University (UTDT), Milei considered himself a classical liberal.

“At that time, he was a mathematical economist, a traditional neoclassic”, says analyst Pablo Stefanoni, who in recent years has dedicated himself to studying the libertarian movement in Argentina and who studied Microeconomics at the University of Buenos Aires with Milei as a professor.

Only in 2013, Milei discovered the Austrian School, reading works by Ludwig von Mises, Friedrich von Hayek and Murray Rothbard.

He experienced a kind of immediate conversion. “The conceptual clarity of the Austrians is superlative and dominates other schools very strongly,” he declared in an interview published in 2017 in the newspaper Cronista.

“When I finished reading Rothbard, I thought, ‘Everything I taught about market structures is wrong. It’s wrong!'”

According to economist Juan Carlos de Pablo, Javier Milei adopted the Austrian School “in an extreme way, more as a catechism than as a thought”. The neoclassical economist was left behind, and, at the hands of Rothbard, the anarcho-capitalist was born.

“Milei adopts the ideas of far-right libertarianism and tries to apply it in Argentina, something unprecedented in this country”, highlights Stefanoni. In Argentina, the State plays a crucial role and is one of the largest employers.

Milei has already stated that, in his idea of ​​cutting expenses, he wants to close several ministries. That’s why, during the campaign, he appeared with a chainsaw, a symbol of the cuts he intends to make.

Admiration for Jesús Huerta de Soto

Within the major economic currents, followers of the Austrian School – both in the past and today – constitute a minority.

Despite having resurfaced in the 1970s with Hayek’s Nobel Prize and in the 1990s in the United States with the paleolibertarians, they currently have few followers in the academic scene. However, the heirs of the Austrian School did not disappear.

One of them is the Spanish academic Jesús Huerta de Soto, one of the references that Milei included in his group of gurus.

The president-elect is one of 52 academics who recently paid tribute to Huerta de Soto, the creator of a master’s degree in economics on the Austrian School at the Universidad Rey Juan Carlos.

The tribute is a publication entitled “Essays in Homage to Jesús Huerta de Soto”, in which Milei includes his writing “Capitalism, Socialism and the Neoclassical Trap”.

Huerta de Soto sent a message of support to Milei in 2021: “I send you an academic hug, showing my admiration for all your efforts, for the work you do, and may you continue like this, firm in the fight for freedom.”

Now, without a majority in Congress and facing resistance from institutions, unions and the opposition, it remains to be seen what Milei will do with the Central Bank, which he wants to “dynamite”, in his own words, and with the rest of the proposals to reduce the role of the State in Argentina.

Text originally published here