Journalism + Keynesian Economics = Media Malpractice

He’s only been in office since late last year, but President Javier Milei of Argentina is doing an amazing job, dramatically reducing inflation in a very short time.

And he’s also significantly reduced the burden of government spending, leading to the nation’s first balanced budget in a long time.

Unsurprisingly, Argentina’s economy is beginning to recover and the currency has strengthened.

In other words, good policy is paying dividends.

Though it’s worth noting that some people are surprised by this outcome.

Here are some excerpts from a Bloomberg report by Manuela Tobias.

Argentina’s economy recorded its best month in May since President Javier Milei took office late last year… Economic activity rose 1.3% from April, above the 0.1% median estimate from analysts in a Bloomberg survey and the first month of growth since Milei’s term began in December. From a year ago, the proxy for gross domestic product grew 2.3%, defying expectations for a decline of similar magnitude… Milei has implemented drastic spending cuts that have helped cool monthly inflation to 4.6% in June from a three decade high of 25.5% at the end of 2023.

While the article is reasonable, notice the headline. It acknowledges that Milei’s policies are producing good outcomes, but we’re supposed to believe those good results are happening “despite cuts” to government.

I don’t know if the reporter deserves the blame (after all, editors sometimes are in charge of headlines), but Keynesian economics deserves the blame for this example of media bias.

Keynesians, after all, think government spending is pro-growth even thought that approach has never worked in the real world. It didn’t work for Hoover or FDR. It didn’t work for Japan. It didn’t work for Obama.

But apparently this misguided theory is still being taught in journalism schools. Maybe the reporter and/or editor can sue for education malpractice?

I already stated that sensible people have not been surprised  about Argentina’s economic renaissance. That’s because we’ve repeatedly seen evidence that Keynesians are wrong about the consequences of spending restraint.

• They were wrong about growth after World War II (and would have been wrong, if they were around at the time, about growth when Harding slashed spending in the early 1920s).
• They were wrong about Thatcher in the 1980s.
• They were wrong about Reagan in the 1980s.
• They were wrong about Canada in the 1990s.
• They were wrong after the sequester in 2013.
• They were wrong about unemployment benefits in 2020.

P.S. Since today’s column is about Keynesian economics, click here, here, and here for some amusing cartoons. Here’s some clever mockery of Keynesianism. And here’s the famous video showing the Keynes v. Hayek rap contest, followed by the equally enjoyable sequel, which features a boxing match between Keynes and Hayek. And even though it’s not the right time of year, here’s the satirical commercial for Keynesian Christmas carols.