In Part I of this series, I looked at how President Milei has achieved an amazing level of spending restraint in just one year.
For Part II, let’s look at his ultimate objective. As he explains in this video, he wants Argentina to be the world’s freest economy.
The above video is an excerpt from a fascinating two-hour discussion with Lex Fridman.
I recommend you watch the entire discussion, but let’s focus today on Milei’s goal of maximizing economic liberty.
The bad news is that if he wants Argentina to become the new Hong Kong, Milei has a long journey. According to Economic Freedom of the World, Argentina ranked a lowly #159 out of 165 nations in 2022.
As you can see from the EFW rankings, Milei’s country gets especially bad scores for Sound Money, Trade and Regulation (dead last for Sound Money and in the bottom-10 percent of the world for the other two categories!).
The good news is that you don’t have to be libertarian Nirvana (or even Liberland) to make a big jump in the rankings.
You don’t even need to be Hong Kong (which used to be very good with scores above 9 but has now declined to 8.58 thanks to Beijing’s intervention).
Heck, almost every country in the western world has experienced a significant decline in economic liberty this century.
Milei actually could put Argentina in first place today merely by achieving the same level of economic liberty (8.67) that the United States had in 2004.
For what it’s worth, I think it would take several years of good reforms to climb that high.
That being said, dramatic improvements are nonetheless possible in a very short period. Here’s my back-of-the-envelope estimate of where Argentina could be by the end of next year.
As you can see, I’m assuming huge improvements in Sound Money (+5) and Trade (+4) and significant improvements in Regulation (+3) and Size of Government (+2).
These big improvements, along with a modest increase in the score for Legal System and Property Rights would boost Argentina’s overall score to 7.55, which would put Argentina #29 in the world based on this year’s rankings.
And let’s not forgot that more economic liberty will have a very positive impact on Argentina’s national prosperity. Which means, according to my Fourth Theorem of Government, that any short-run pain from reform will be easily offset by long-run economic and political rewards.
P.S. There is, of course, a negative scenario. The population may get impatient and rebel against Milei’s reforms. The legislature, which is still controlled by the Peronists who caused the country’s decline, may rise up and force through bad policies and block good policies. Let’s hope my positive scenario happens instead.
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Image credit: World Economic Forum | CC BY-NC-SA 2.0.
