Unprecedented: Five Months in Milei’s Argentina

It may be impressive that Milei cut public spending by 13 points of GDP in his first three months in power, but TCS asks, at what human cost?

Graffiti reading: ‘the political caste was you’!

A Tuesday in Caballito, Buenos Aires. Tired, waiting in the queue, I see an older woman brandishing her receipt, arguing at the check-out till, insisting that the price of a bag of biscuits advertised was less than she paid.

“Oh, sorry, the deal was only on the smaller bags.” She tuts, comments how her friend just yesterday paid 1200 pesos for the bag; and sighs saying if she can’t have the deal on the biscuits, she needs a refund. What’s so noteworthy I think about a frugal older woman not buying a bag of biscuits?

In Javier Milei’s Argentina, where spending on contributory pensions was slashed by 40% in January and February, and more cuts to pensions are planned in the proposed ley de bases, such behaviour takes on a new light. How are Argentines coping with Milei’s ajustazo (‘great adjustment’) that he proudly identifies as unprecedented and how do such drastic cuts to public services and subsidies wrought by Milei’s motosierra (chainsaw) manifest in daily life?

What is the situation in Argentina?

In a recent interview with the BBC, Ione Wells asked Milei if he knew how much a litre of milk now cost in Buenos Aires. Wells had spoken to an older woman who felt that it is pensioners like her who are having to shoulder the ajustazo, not the political casta, (establishment) as Milei had previously promised.  The price of milk, however, along with other staples including bread, has doubled since Milei took power.  The National Institute of Statistics and Censuses (INDEC) reported that the Argentine minimum wage now is worth less than a third of the basic goods that a family with two children needs. That is excluding rent.

The poster reads: “What you see in the museum was done by members of CONICET that have been fired [by Milei’s reforms”

Milei was voted in and took power on the 10th December 2023 on the promise of the power of his two trusty tools- his motosierra and licuadora (blender). Using these, he promised to slash inflation (greatly needed as Argentina had the highest inflation in the world with 276% in 2023), and to achieve a fiscal surplus (to tax or earn more than the government spends) by ‘liquidating’ what he deemed to be ‘unnecessary’ government ministries and spending. Such an economic burden would fall, he promised, on the political casta, the establishment who protect their own vested interests through policies that “harm the people”.

“50% of Argentines are now in poverty, an increase from 38% in September, and real term salaries have been set back by 20 years.”

But the reality of his ajustazo is that 50% of Argentines are now in poverty, an increase from 38% in September, and real term salaries have been set back by 20 years. Such high rates of poverty haven’t been seen in Argentina since the economic, social and financial crisis of 2001/2, which saw a general strike, mass protests ending in 39 deaths, and ended in the resignation of the then President Fernando de la Rúa.  The government has offered support,by doubling universal child support and increasing the tarjeta de alimentar (food support card) by 50%. But many are falling through the cracks. Veronica Smink reports that the largest growth in poverty, from 27% to 44%, has been within the demographic of the lower middle classes that don’t receive state support and have to fend for themselves. Consumption of three iconic Argentine goods; meat, milk and yerba maté, has fallen. Tellingly, yerba maté normally is an inelastic good; that is, however tough the economic situation becomes, Argentines continue to buy it.

Our analysis

Spending does need to be cut in Argentina, and policy shifts to curb inflation and stabilise the peso in the long-run are part of such a project. An unstable currency serves nobody, neither the elite political class nor the poorest Argentinians. But when policy changes are enacted de golpe (all of a sudden) without sufficient support, they only hurt those who are worse off. The upper classes tend to have their money saved in offshore accounts – or receive their salaries in US Dollars, insulating them from the worst of inflation and the ever devaluating peso –whilst the poorest must try to alcanzar el mes (‘reach the end of the month’) without financial aid.

“Milei’s evaluation of his performance as “marvellous” will ring hollow to families who are struggling to buy even the most essential of goods such as milk and bread.”

What is needed is a middle-ground approach, not flip-flopping between extreme spending and extreme austerity. Australia was once in a similar position with ‘lots of commodities, a history of immigration and remoteness from big industrial centres’,In that case, they managed to build an economy with a broader base than Argentina has currently so a middle-ground approach isn’t out of the question with the caveat that Argentina lacks the stable political apparatus that Australian has. Perhaps it was unrealistic to expect such a moderate economic plan from el loco (the mad one) as Milei has come to be known. Milei’s evaluation of his performance as “marvellous” will ring hollow to families who are struggling to buy even the most essential of goods such as milk and bread.

Ultimately, the question lies as to what the government wants to prioritise for the country? Are cultural institutes (the INCAA) and science research (CONICET), two ministries that recently had their funding severely cut, not important for the country?

Poster reading, "They don't want you to retire. The basic law aims to end extensions [to government support], increase the retirement age of women and force you to pay 80% of your own pension. 

[SAY] NO TO RETIREMENT REFORM. 

(You were the political casta)

Argentina cannot hollow itself out for the sake of the promises of 'investment' and 'industry' that international capital provides. Argentina thrives on its vibrant cultural and intellectual life. Argentinian artistry has received critical acclaim (one thinks of Mariana Enriquez' acclaimed short stories and the 2014's Oscar-nominated Wild Tales as just a few examples).Technological and scientific innovation too is, in the 21st century, almost a prerequisite for any successful nation, and to consider it as purely excessive rather than another potential source of much-needed revenue is short-sighted.

“These policies are dampening the spark of Argentina’s cultural soul, looking to replace such a spark, with a controlled and unremarkable neoliberal flame.”

Buenos Aires is at risk of becoming any-city-wherever, indistinguishable from all other metropolises that have handed the keys over to big finance. These policies are dampening the spark of Argentina’s cultural soul, looking to replace such a spark, with a controlled and unremarkable neoliberal flame. And such neoliberal light and warmth in Milei’s Argentina, will only fall on the haves; the have-nots, like the old woman with whom we began, will be left out in the cold.