Supporters of Javier Milei wave reproductions of dollars with his face in Buenos Aires.CRISTINA SILLE (Portal)
Economists around the world are warning about the “dangers” of Argentine presidential candidate Javier Milei’s program. More than 100 academics, intellectuals and politicians have signed a document warning that ultra-liberal proposals to dollarize the economy or reduce public spending to a minimum are “potentially very damaging” to the country’s economy and its people. “Given Argentina’s frequent financial crises and recurring periods of extremely high inflation, it is understandable that there is a deep-rooted desire for economic stability. Although seemingly simple solutions may be attractive, they are likely to cause more havoc in the short term while reducing the scope for long-term political action,” said the text, signed by, among others, Serbia’s Jayati Ghosh, India’s Branko Milanovic, France’s Thomas Piketty or the Colombian José Antonio Ocampo.
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“As economists from around the world who support broad economic development in Argentina, we are particularly concerned about the economic program of one of the candidates,” the document said, noting that Milei’s ideas “ignore the complexities of modern economies let”. Ignore the lessons of historical crises and open the door to exacerbating already serious inequalities.” The document focuses on two of the proposals that the Casa Rosada candidate has carried as a banner: replacing the national currency with the dollar, because According to his vision, the Argentine peso “is worth nothing” and reducing public spending to a minimum. “Both ideas may seem attractive because of their simplicity and their promise of a quick solution to control inflation and instability. But they fail to recognize key economic realities,” the text says.
The text, titled “The Dangers of Javier Milei’s Economic Program in Argentina,” was published as less than two weeks remain until the second round of voting on November 19 will decide who will be the country’s next president: Yes, Milei , an ultra-liberal economist dedicated to the Austrian School, or Sergio Massa, who defends basic principles of Peronism such as social justice or economic independence and is the economy minister of a country in crisis, with annual inflation of 140% and four percent of 10 citizens in Poverty. This joint warning against the Ultra’s ideas joins a series of previous warnings from Argentine leaders from various sectors such as business, culture or science.
The 108 signatories to this document include economists with long international careers and names associated with the study of poverty and inequality, such as Jayati Ghosh and Robert Pollin, professors at the University of Massachusetts Amherst; Branko Milanovic, a professor at New York University and former chief economist at the World Bank; the intellectual Thomas Piketty, professor at the Paris School of Economics; José Antonio Ocampo, three times Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) and Colombian Minister, with Presidents Gustavo Petro and César Gaviria; José Gabriel Palma, Emeritus Professor at the University of Cambridge and Full Professor at the University of Santiago de Chile, or Alicia Girón, Emeritus Researcher at the National Autonomous University of Mexico and former President of the International Association of Feminist Economics.
The signatories recognize that dollarization of the economy “could be tempting” if “the value of savings and the ability to consume are decimated by rampant inflation.” However, they warn: “The current lack of foreign exchange reserves would make the initial conversion rate of the peso to the dollar so high that it would lead to more inflation.” This would “lead to a decline in real wages” and “relieve workers of the burden of adjustment.” “. “Dollarization also implies the long-term impossibility of establishing monetary sovereignty,” the text warns.
Economists recall the country’s “protodolarization” in the 1990s, when one peso became worth one dollar. At that time, a currency law, the Convertibility Law, established a fixed equivalence value between the Argentine peso and the US dollar. “It created a brief illusion of stability, but it had a negative impact on the real economy.” “It led to unemployment and loss of real income for workers and ultimately led to an even greater crisis in 2001,” the document says.
Milei’s proposal to reduce the role of the state, on the other hand, would lead to “greater socioeconomic inequality” in a country that “needs differentiated and diverse policies that take into account the needs of different social groups,” the text says. “Significant cuts in public spending would increase already high levels of poverty and inequality and could lead to a significant increase in social tensions and conflict,” the document says.
“The laissez-faire model [dejar hacer al mercado] It assumes that markets will function perfectly if the government does not intervene. But unregulated markets are not harmless,” says the text, which continues: “Markets are also vulnerable to failures caused by externalities and information asymmetry.” “Argentinians are all too familiar with the pain of “Laissez-faire economics imposed by international lenders such as the IMF, which in the past has increased poverty and economic insecurity and stunted the country’s development,” the text says.
Professor Jayati Ghosh, one of the signatories and managing director of International Development Economics Associates (IDEAS) since 2002, tells EL PAÍS that “there are better ways to address the imbalances in the Argentine economy.” For this reason, the joint position of economists on this issue is considered necessary. “Argentina needs economic policies designed to unleash a wave of private and public investment and innovation to create high-quality productive jobs that can help make the economy more sustainable and inclusive,” he explains. For Ghosh, this requires “an active state that works creatively with the private sector” to “promote investment.”
“It is a very critical moment when Argentines will take part in elections that could lead to extreme political measures,” continues the professor of economics at Jawaharlal Nehru University in New Delhi. “We believe these are dangerous economic ideas that simplistically denigrate the public sector and public participation in the economy. If implemented, these proposals would cause new suffering for the Argentine people and increase inequality in the country. “Any ‘stability’ achieved through these drastic measures would lead to greater misery for working people,” explains Ghosh. For the professor, this is “counterproductive and unnecessary”: “It is important that the Argentine population is aware of this.”