Milei shows how to turn socialist basket case into thriving free-market economy − new IRR paper

Javier Milei, who assumed Argentina’s presidency in December 2023, is demonstrating in a way that has never been achieved before that it is possible to turn a stagnant socialist basket case into a thriving free-market economy through radical, painful and rapid libertarian reforms.

In just over a year, Milei’s drastic reform measures have produced encouraging numbers on inflation, economic growth and capital flows that suggest his plan is working.

Can Milei consolidate his successes, and what are the lessons for South Africa?

These are among the key themes of the latest report from the Institute of Race Relations (IRR), Lessons for South Africa from Argentina's radical economic reforms, written by Ivo Vegter.

The paper was launched today via a webinar in which Vegter discussed his research, and suggestions about what South Africa could learn from Milei’s Argentina, with IRR Geopolitics Researcher and host of the Daily Friend Show Nicholas Lorimer.

The report examines the background against which Milei was elected, the reforms he decreed or enacted, and the highly encouraging economic consequences of those reforms.

And it proposes some lessons that South Africa can draw from events in Argentina.

Vegter points out that South Africa’s economy closely resembles that in which Milei campaigned for the presidency. It, too, is dominated by a socialist-inclined and frequently corrupt government and crony elite. It, too, is stagnant and unable to relieve poverty or create prosperity for the majority of its people. It, too, is populated by people who are unhappy and disillusioned with the economic performance of the present regime.

"The lessons, in brief, are that all failing socialist economies face a final reckoning, sooner or later. The electorate will respond by either breaking to the revolutionary left, which spells doom, or accepting potentially painful market-oriented reforms that promise long-term improvements in their quality of life.

"Voters do not have endless patience, however, so changes have to be radical and take place fast. An economy on the brink of failure needs a rapid cure. Quick results give people hope. Hope sustains reform. Hope also lures investors, both domestic and foreign, back into the market. Economic reforms are hampered by ideological red lines.

"There must be an acceptance among the political class that temporary hardship is inevitable, and is the price an economy must pay to cure the ills of its socialist past. This requires deft and fearless leadership."

The report argues that thorough public education, explaining basic economics and why free markets work, can lay the groundwork for an unhappy and disillusioned electorate to make the right choice, and vote for economic reform, even knowing that it might bring pain and turmoil in the short term.

To watch today’s webinar, go to: https://irr.org.za/reports/occasional-reports/lessons-for-south-africa-from-argentinas-radical-economic-reforms

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za