Is Javier Milei the Future of Libertarian Governance or Its Last Stand?

Philip Pilkington examines the meteoric rise of newly elected president of Argentina’s Javier Milei and asks whether his “anarcho-capitalism” offers any real solutions to our economic dysfunction.

On the 19^th of November 2023, Javier Milei won the presidency of Argentina with a healthy 55.7% of the vote. When he assumed office in December Milei would become the first self-declared ‘anarcho-capitalist’ to take control over a major country in history. Milei was elected because Argentineans were sick of the severe economic dysfunction in their country. When they went to the polls in mid-November, the inflation rate in Argentina was 161% meaning that prices were more than doubling every year. High inflation had long been a problem in the country, but since the beginning of 2022 it had drifted away from the 50% rate people were used to and started climbing and climbing. No one else had any ideas for what to do so Argentinean voters gave Milei a shot.

Milei himself is a bizarre character. Although the world has seen a series of eccentric political personalities emerge in the past few years, none can best Milei. An economist by training, Milei has cultivated his character on Argentinean television. He has portrayed himself as being a former tantric sex coach and hard rock singer. He has dressed in a strange superhero outfit and dubbed himself ‘Captain AnCap’ – ‘AnCap’ being a very online acronym for anarcho-capitalism. Much of this can be put down to the charming penchant of Argentineans, much misunderstood outside the country, for absurdist humour. But Milei is certainly serious about his extreme anarcho-capitalist beliefs which include advocating for a free market in human organs – what could possibly go wrong with such proposals?

Old Wine, Eugenic Wineskins

Milei’s signature proposal in the election was to dollarize the Argentinean economy to stamp out inflation. What does this mean? Exactly what it says: Argentina would switch from using pesos to using dollars; and since Argentina have no control over the exchange rate of interest rate of the US dollar, this would stabilize prices in the economy. The first logical a priori question that any non-economist should ask is: if it were this easy then why hadn’t the Argentinean government tried it before? The most obvious a priori answer – and as we shall see, the correct one – is that it is not this easy.

Yet the idea started to get support in respectable corners. The most prominent advocate of Milei’s plan in the English-speaking world is the more mainstream centre-right American libertarian economist Tyler Cowen. “Argentina’s Future is With the Dollar”, Cowen wrote in a Bloomberg column in August of 2023. Cowen is in many ways the ‘respectable face’ of American libertarianism. In a 2012 New York Times column, David Brooks described him as “one of the more influential bloggers on the right… [who starts] from broadly libertarian principles but [does] not apply them in a doctrinaire way”.

Portraying Cowen as being “on the right” is bizarre, although not surprising coming from ideologically confused baby boomers like Brooks. Cowen is a self-described liberal. This is not surprising as all libertarians are ultimately liberals, and all their ideas can be traced back to liberal sources – although their handling of these sources is usually haphazard, overly rigid and dogmatic, and slipshod. Milei is now also being portrayed as being “on the right”. The Guardian has described the new Argentinean president as being a “far-right libertarian” – obviously an oxymoron to anyone who understands the genesis of political terms like “left” and “right”, much less anyone with a broad grounding in political philosophy. Milei is certainly extreme; but his extremism is that of extreme liberalism.

What is going on here? Simply put: the libertarians, who have been ideologically sidelined since the populist upsurge in the mid-2010s, are trying to reclaim the mantle of being on the right of the right. They have performed well in this regard. If you ask most people with vaguely populist leanings what they think of Milei, they will say that he is a fellow traveller. Tucker Carlson recently interviewed the Argentinean president. To anyone without a deep understanding of political ideas, Milei would appear to be the real deal.

This is part of a broader and seemingly well-funded attempt to repackage libertarianism to give it renewed appeal to young people. Much of this repackaging, sadly, has taken the form of welding libertarian ideas onto racist ideas – mostly based around racial disparities in IQ scores. The science behind the new eugenic libertarianism is idiosyncratic and outdated. It has been known for decades that growing up in impoverished circumstances predicts lower IQ. In the 1970s, people in Ireland had low average IQ scores of between 87 and 93. Yet full-blood Irish Americans in the same period had an average IQ close to the mean of 100. These two groups, who had identical genetic profiles, diverged because they grew up in different circumstances: the Irish grew up in a then-impoverished developing country; while the Irish Americans grew up in the wealthiest country in the world. As Ireland developed economically, its IQ score started to converge to the mean. IQ is not really hard-wired at the group level – i.e. on average – in any meaningful sense.

Yet the eugenic ideas give the libertarian ideas the ‘edge’ that they lack. It is by now obvious to younger people that ideas that try to increase, say, access to cheap consumer goods have little to say about our contemporary problems. But because questions surrounding race in America have become both heated and censorious, it is possible to marry ideas about how to increase the quality and quantity of burgers on sale with ideas that ‘challenge’ contemporary racial taboos. These feel subversive for young people, but they are a soporific because they do not actually address the problems we have in our society. They ultimately tell people that they should enjoy their ever-growing range of consumer products and blame social problems on different racial groups. Needless to say, ifsuch ideas ever take hold in a multiethnic country like America they would lead to potentially extreme social and political destabilisation. It barely needs to be said that ethnic tensions are never constructive and always hollow out the societies in which they take hold.

The recent upsurge in ‘edgy’ libertarian ideology has given rise to comical ideological chimeras. Take the example of Richard Hanania, a popular commentator in this space. Hanania has developed an ideology of what he calls“Nietzschean liberalism”. Yet anyone who has read the writings of Friedrich Nietzsche would know that he loathed liberal ideas. In his youth he was introduced to these ideas in depth by his friend Paul Rée and found them utterly dreary and mediocre. In his late work Twilight of the Idols, he lampooned liberalism, writing:

Liberal institutions cease to be liberal as soon as they are attained: later on, there are no worse and no more thorough injurers of freedom than liberal institutions. One knows, indeed, what their ways bring: they undermine the will to power; they level mountain and valley, and call that morality; they make men small, cowardly, and hedonistic — every time it is the herd animal that triumphs with them. Liberalism: in other words, herd-animalization.

Hanania’s attempt to create a “Nietzschean liberalism” is not unlike a mad scientist cutting a dog and a cat in half and stitching the bottom half of the cat to the top half of the dog in the hope that he creates a new creature. Of course, the result of this experiment is merely a dead dog, a dead cat, and an awful mess. Ditto for Hanania’s chimera. These desperate attempts at relevance speak to a broader problem with libertarianism: that it is an answer to a question that no one asked.

Identity Crises

To understand the rolling crisis of libertarianism we must speak to its historical development. Libertarians rightly trace their ideas back to Enlightenment liberal thinkers. But ultimately, they became a dissident stream in liberal thought in the first half of the 20^th century. The key development here was the emergence of the Austrian School of Economics. The initial emergence of the Austrian School was part of the broader emergence of the neoclassical school of economics. In the late-19^th century, neoclassical economics started to pop up in major European countries. It was characterised by the idea of ‘utility maximisation’ and was heavily mathematicised. The Austrian School was simply the Germanic version of this global development. The Austrians were arguing for their ideas with the Marxists, on the one hand, and the Historical School on the other.

The key moment, however, came when the Austrian School started to break with the neoclassical school in the 1920s and 1930s. The debates are arcane and mainly methodological. The best way to summarise the debates is to say that while the neoclassicals believed that economies could be modelled much like physical systems, Austrians did not believe this. Rather, for Austrians, economies are fundamentally human entities and humans are unpredictable. This unpredictability introduced an element of uncertainty into economic thinking that cannot be overcome.

The Austrian criticisms of the neoclassical school are both true and interesting. But the real question is whether they could produce a fundamentally different research program. Since the divergence of the two schools, the neoclassical school has developed an impressive intellectual apparatus. In the same period, the Austrians struggled. Their most interesting work is on the business cycle and with their Austrian Business Cycle Theory (ABCT) they can indeed claim to have an original intellectual apparatus. The ABCT is based on the interaction between capital allocation – that is, the building of new businesses – and the banking system. ABCT views the market as being an excellent allocator of capital when left to itself. But when trouble starts in the banking sector – typically attributed to the central bank – easy money can start to interfere with capital allocation. When this happens, imbalances build up that must eventually be washed out by the turning of the business cycle. Recessions are therefore viewed as the clearing out of poor capital allocations driven by central bank mischief.

The ABCT is a solid contribution to economics, but it cannot be taken as Gospel Truth. In reality, different business cycles have different causes. Some business cycles may follow the Austrian model. But others may follow different dynamics such as those outlined by Nicholas Kaldor or alternatively those highlighted by Hyman Minsky. More importantly, however, it cannot justify the existence of a separate school of economics. Yet it is one of the only innovations the Austrians managed to come up with. After developing the ABCT, the early Austrian thinkers turned to philosophical and epistemological speculation. Some of these efforts, like Friedrich Hayek’s work on indeterminacy, are interesting. Others, like Ludwig Von Mises’ attempt to develop an all-encompassing human science of ‘praxeology’, are crankishreminiscent of the thought of Lyndon LaRouche. But again, neither of these can justify an alternative school of thought.

The Austrian School effectively ran aground. They were unable to create a true alternative school of economic thought. And so, they remained, and remain to this day, dissident neoclassical economists. The history of libertarianism, which is intimately entangled with the history of the Austrian School, suffers the same problem: libertarians have never really managed to meaningfully distinguish themselves from liberals and so they remain dissident liberals. This leads libertarians to adopt a posture of being the “real” liberals, with their less ideologically pure comrades being imposters. Needless to say, this quickly descends into the old “no true Scotsman” type of myopic thinking, infighting, purity tests and so on.

The current libertarian search for relevance may seem novel due to the contemporary political climate. But it is not nearly as novel as it looks. The libertarians have always found it hard to find a firm place to stand in political debate. They are extremely useful for the liberal project as they can be portrayed as “far right”, thereby foreclosing any actual alternatives to liberalism. But they are not constructively useful. All they have to offer are liberal ideas pushed to their extreme – at which point they often become absurd,grotesque, and obviously foolish to any practical-minded persion as with Milei’s desire for Amazon to set up warehouses to house and traffic human organs.

Last Orders

Days after his electoral victory Javier Milei quietly dropped his promises to dollarize the Argentinean economy. The dollarisation proposal was never serious because, to put it bluntly, there were never enough dollars in Argentina to dollarize the economy. In November, as the Argentineans went to the polls, the country had $17.4 billion in foreign exchange reserves. Yet Argentina is a large economy with a GDP of around $631 billion. This means that, if they had used their foreign exchange reserves to dollarize the economy, each dollar would have to be spent on average around 32 times every year to support the economy. To give some sense of how large a turnover this is consider the United States. At the end of 2023, the GDP of the United States is around $27.61 trillion. The M3 money supply – that is, the total number of dollars in circulation – clocked in at $20.8 trillion meaning that every dollar was spent on average around 1.3 times per year. Going back over the data we see that since the 1970s, the average dollar has never been spent more than 2.5 times per year. Argentina did not have nearly enough dollars to dollarize the economy.

But Milei had made big promises. He had told his supporters that there were simple solutions to the inflation problem and that previous governments had not implemented them because they were corrupt and feckless. This meant that he had to do something radical. So, he decided to massively devalue the Argentinean peso. In mid-December, the peso fell from 0.0028 per dollar to 0.0012 per dollar – a decline of well over 50%. Milei justified this by saying, in true libertarian fashion, that this represented the true market value of the peso. In this he is no doubt correct, but market purity does not always translate into practical results. A few weeks later, the inflation data emerged and showed that inflation had risen from 161% in November to 211% in December.

Argentina is now likely locked into a vicious cycle where the inflation rate drives down the value of the peso and the decline in the peso drives up the rate of inflation. This is a classic hyperinflationary death spiral of the sort experienced in Weimar Germany and Zimbabwe or, ironically enough, in Salvador Allende’s socialist Chile in the 1970s. Once this hyperinflation takes hold it typically becomes completely uncontrollable. Chaos and social disorder ensue. Frankly, Argentina will be lucky if they come out of this without the country collapsing completely. At best, the average Argentinean will see their living standards collapse. At worst, law and order will break down.

When the collapse happens, the libertarians will no doubt try to shift the blame. Some will say that triggering a hyperinflation was necessary for the economy. But it will be obvious to most people that the eccentric in the superhero outfit destroyed his country’s economy by turning it into a libertarian laboratory experiment. At this point, the scales will likely fall from the eyes of populist supporters of Milei, and they will see him for the ideologue and the agent of chaos that he is. Will this be enough to drive a stake through the heart of libertarianism? That is unclear. These ideas no longer have a great deal of purchase in high intellectual echelons, but they remain popular in political circles. Could Milei be libertarianism’s last ride? We will have to wait and see.