Milei’s free market defies experts, revives Argentina’s economy: Ivo Vegter
Key topics:
Over 100 economists warned Milei’s far-right economic policies risked harm and inequality.
Milei’s free-market reforms sparked strong growth, lower inflation, and reduced poverty.
Critics misunderstood markets, ignoring that Argentina’s past socialist policies failed repeatedly.
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By Ivo Vegter*
Over 100 economists warned against Javier Milei’s economic policies. Over 100 economists were dead wrong.
A friend sent me an article from The Guardian, published shortly before the 2023 election in Argentina won by libertarian candidate Javier Milei. It is headlined: “Economists warn electing far-right Milei would spell ‘devastation’ for Argentina”.
It reports on an open letter, penned by four eminent economists and signed by over 100 others, which warns of “[t]he dangers of Javier Milei’s economic program in Argentina”.
I missed the letter at the time, perhaps because it was published in a Spanish-language newspaper, behind a paywall. That’s a high hurdle, but it’s nothing an Internet Archive and machine translation cannot overcome.
The authors are influential economic superstars: Thomas Piketty, author of the famous (or rather, I should say infamous) Marxist manifesto on inequality, Capital in the 21st Century; and three other neo-socialists, India’s Jayati Ghosh; the Serbian-American Branko Milanović, and Colombia’s former finance minister José Antonio Ocampo.
Their warning was stark: Milei’s proposed policies were, they said, “fraught with risks that make them potentially very harmful to the Argentine economy and people,” and he “ignores the complexities of modern economies, ignore[s] the lessons of historical crises and open[s] the door to the accentuation of already serious inequalities”.
Their problem? Milei’s policies are laissez-faire, but “unregulated markets are not benign: they reinforce unequal power relations that worsen inequality and make it difficult to implement key development policies, including industrial, social and environmental policies”.
Proof, pudding
We’re 18 months on, and the numbers are already proving these eminent economists wrong. If the proof is in the pudding, Milei’s pudding is delicious.
His radical free-market reforms, which included halving the number of government ministries and slashing public spending, pulled Argentina out of a recession. In April 2025, it recorded robust 7.7% year-on-year growth.
Inflation dropped like a stone, from an annual rate of 211.4% in 2023 to 43.5 percent by mid-2025. It is still falling, and the month-to-month rate of 1.5% in May 2025 is the lowest recorded in five years.
Meanwhile, the poverty rate, which even free-market economists expected would rise in the short term, declined from 52.9% in the first half of 2024 to 38.1% in the second half.
In May, the Institute of Race Relations published my paper on Argentina’s remarkable turnaround from a corrupt, stagnant, socialist backwater with one of the worst economies on the planet, and why South Africa can learn valuable lessons from it.
How did over 100 of the world’s most eminent economists get it so wrong?
Study versus control
At the root of this question lies the problem that universities do not present economics as a study of human action and of the choices people make when they set out to satisfy their unlimited needs and wants by the efficient use of scarce resources.
The economics establishment doesn’t view the subject merely as a social study, but as an objective science. Universities teach economics as a means not to study human behaviour, but to control it. They provide economists with the tools by which governments can manipulate economies to achieve political ends.
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The neo-Keynesian synthesis that is taught in most faculties accepts the view that classical free markets are efficient in the long term, but believes that Keynesian interventions in markets are necessary to correct short-term imbalances and market failures.
Most professional economists believe governments can, and should, direct the economy through monetary and fiscal policy based on mathematical models of how people might respond to economic interventions by the state. The consequence of this school of thought is that it gave governments virtual carte blanche to inflate the money supply in order to fund deficit spending, which in turn assured the loyalty of their voter base. It also synchronised business cycles into market-wide booms and busts, which, inevitably, these economists blame on insufficiently regulated markets instead of on the monetary and fiscal policy that caused them.
Critique
To see how they went wrong, it is helpful to critique some quotations from the open letter.
“The economic vision underlying these proposals supposedly advocates minimal government intervention in the market, but in reality relies heavily on state policies to protect those already economically powerful.”
The only state policy that “protects those already economically powerful” is respect for property rights. The implication is that the government ought to be an agent of redistribution, instead of a protector of life, liberty and property. It is a normative value judgement, not an empirical description of economics, and it exposes a fundamental philosophical difference with Milei.
Redistributive policies aren’t always bad, but they always reduce an economy’s capacity to create wealth. To pay for redistribution, someone has to create wealth in the first place, and as Milei has clearly stated, “There is no money” in Argentina for extravagant government spending.
“The model of laissez-faire assumes that markets work perfectly if the government does not intervene.”
It does not assume so at all. How can it, when markets are merely the aggregate of choices made by fallible humans with imperfect knowledge?
Laissez-faire theory holds that markets are the most efficient way to deploy finite resources in the production of infinite wants and needs. More importantly, it holds that a single controlling agent (like a government) cannot possibly know all that it needs to know in order to determine people’s subjective wants and needs, and how they can best be satisfied. The market is merely a term for a distributed information system, in which no single actor has sufficient knowledge to make production decisions for an entire society.
Inequality
“But unregulated markets are not benign: they reinforce unequal power relations that worsen inequality and make it difficult to implement key development policies, including industrial, social and environmental policies.”
Markets are neither benign nor malign. They just are. They are a society’s aggregate knowledge about needs, wants, resources and production methods, all summarised into prices.
They don’t worsen inequality, either: inequality is actually lower in the most free economies in the world, and higher in unfree economies subject to socialist redistribution.
Besides, inequality is a red herring. As I wrote a few years ago: “Being unable to point to rising poverty as a crisis of free-market capitalism, they had to come up with a new bogeyman, and they found one in the apparently unfair notion of ‘inequality’.”
Moreover, a 2015 IMF study showed that the main economic drag caused by inequality involves the enrichment of politically connected elites, and not free markets. The problem is cronyism, not commerce, and of cronyism, Argentina had plenty.
Market failures
“Markets are also prone to failures, caused by externalities (when all benefits or costs cannot be attributed to individual agents) and information asymmetry (when some agents in a market know more than others).”
Markets, being composed of people, are prone to failures. So are governments. Unlike governments, however, markets are self-correcting. If one person fails, another steps up to correct the failure. If one company fails to produce what the market needs, a competitor will arise to eat its lunch.
The consequence is that markets are far less prone to failure than governments are.
Externalities, as I’ve written before, are the catch-all excuse for regulation. When externalities can be quantified, it is easy enough to sue, and regulation is usually not controversial. More commonly, however, the sorts of externalities that keep left-wing economists up at night are based on thumb-suck guesstimations of diffuse and indirect harms.
As for information asymmetry, there is no bigger information asymmetry than between government bureaucrats and the market as a whole. You can’t legislate information asymmetry away. The entire point of prices, and why they talk of “price discovery” is to minimise information asymmetry.
Financial crisis
“The 2008 global financial crisis demonstrated that inadequate regulation of markets can have disastrous consequences. The experience of the Covid-19 pandemic provided further evidence of the need for public intervention.”
No, the 2008 global financial crisis demonstrated that reckless intervention in markets can have disastrous consequences. Don’t blame the bankers, and don’t blame those who saw it coming years earlier (like libertarian Ron Paul in 2003).
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And the Covid-19 pandemic only provided evidence of the need for public intervention in response to an economic crisis caused by public intervention.
Public spending
“A significant reduction in public spending would increase already high levels of poverty and inequality, and could lead to a significant increase in social tensions and conflicts.”
Except that it didn’t.
“Milei’s idea of drastically cutting taxes while reducing public spending would significantly reduce the state’s ability to satisfy the social and economic rights of citizens.”
That would be the point, yes.
“As Argentina navigates its complex economic landscape, it is essential to approach policy formulation with balanced and empirically informed strategies that are not only attractive in the short term, but also sustainable, equitable and enabling in the long term.”
There was nothing uniquely complex about Argentina’s economic landscape. And the policies that our august left-wing economists prescribe are the same policies that had failed Argentina for over a century.
They’re the same policies that are failing so many countries, including South Africa.
What Milei has proven is that orthodox left-wing economists are simply wrong.
*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets.
This article was first published by Daily Friend and is republished with permission