The Peter Zeihan Podcast Series - Milei One Year On || Peter Zeihan

Episode Date: January 26, 2025

Javier Milei, Argentina's President, has been leading the country for a year now. So, let's review what he has been able to accomplish in that time.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/milei-one-year-on

Everybody, good morning. Peter Zion here coming to you from near the head of Matuky-Tuky Valley, West Matuspiring National Park. We're going to pan around a lot on this one. It's going to take a question, oh yeah, New Zealand, obviously. I'm going to take a question from the Patreon page that I've been getting a lot. And it's, what do I think of the president of Argentina, Millet, who has been going through a series of reforms. It's been a year now since he took over. And when I said it a year ago, he's like he's got a lot of work ahead of them. and we're not going to see results soon, that people are looking for an update.

And the update is he's got a lot of work in front of him and we're not going to see results soon. Let's talk about the good things that have happened that he should get credit for and the good things are about to happen that he probably shouldn't, and then we'll go into the other stuff. So first things first,

last year was really bad for growth in Argentina. Argentina, because of its old government system, Peronism, has a horrible economy, and it shouldn't. The Argentine system has naturally, navigable waterways overlaying great arable land. In fact, the second largest chunk of those two things combined in the world after North America, it should be a superpower. And at the turn of the previous century, actually at the end of World War I, it was the fourth richest economy in the

world. And now it's, back then it was maybe 90% of the wealth of the United States per capita. Now it's less than 30%. The reason is we had this guy come in in the late 40s and ruling until about 55 by the name of Peron, who formed a new type of political economic ideology that combines the worst aspects of fascism and socialism, where the government owns all kinds of things and runs them badly and into the ground, and whoever gets political power can basically do whatever they want, but they also control the labor unions and all of the export system. And there's a lot of other messy things going on. It's kind of a nonsensical ideology, but it is the dominant ideology of Argentina and it has systematically destroyed the ability of the country to generate capital and wealth.

Instead, they do oversimplification here. They concentrate power in the hands of a few people within the political class and then print a lot of currency to artificially increase demand for their supporters so everyone feels rich, which only generates hyperinflation. So Malay came in and tried to rip all of this up from the roots and considering he didn't have majority in Congress, that was kind of a heavy carry, but he did a pretty good job, and that artificial demand is now gone, and so inflation has gotten back down to more normal levels, and he absolutely deserves all the credit for that. The other side of that, unfortunately, is that when most of the country, at least half of it, is thriving on that sort of system where the government throws money into the system to generate that artificial demand,

and then the money goes away, the demand goes away. Yes, that takes care of inflation, but it puts a lot of people in the poverty. So when it comes to things like poverty and mealuation and generating the sort of economic activity at home that is necessary to then use a more capitalist structure to bring wealth back, that takes a lot more than a year, and we're only in the very early stages of it. Second, things are going to get better for Argentina this year independent of Malay's reforms. Last year, there was a drought. Argentina is primarily... That's a Kia right there. It's parrot.

Argentina is primarily a commodities producer, especially soy, and there were droughts last year. So we saw a significant contraction in the primary extraction economy. It looks like the weather forecasts coming up for the next year looking to be positive. So simply a return to the median for agricultural production is going to generate pretty strong growth. But what we really need to see is capital start getting generated at home. Now, foreign investors are starting to express more optimism in what Malay is doing, and they're starting to buy up Argentinian government bonds again. But we've been in this cycle before

where you get a reformist government that tries to fix a few things, make some progress for him to start to come back in, and you get another Peronis government that comes in and wrecks it all again. A little word of caution. Until such time as Argentina is generating its own capital, and until such time as Malay or someone like him

can actually win more than one term in a row, It's really hard to say that Argentina has emerged from its funk. If it can pull that off, it's going to be doing very, very well because the bones are very good. And I would just put a little bit of caution in there for anyone who's trying to compare Argentinian politics to anywhere else. For example, there's a lot of people in the United States who are in the Trump field who look at Malay and how he's kind of taken the axe to the government and they say, oh, yeah, we should do that. keep in mind that most of what Donald Trump says he wants to do actually has more in common with Perone when it comes to centralization of control, especially when it comes to things like labor, than it does with Malay, who is more of a libertarian.

So, you know, there are lessons here. We should study it, but we shouldn't get crazy with what sort of parallels we try to draw. Oh, and one more thing because I know people are going to ask. Careful the parallels you draw between what's going on in Argentina now and really anywhere else, especially the United States. The U.S. and Argentina may have similar geographies, but their political systems diverged a long time ago. So, for example, there are folks in the Trump camp who are looking at L.A. and him taking an axe to the state as something that they would like to do in the United States.

But there is no stomach for that in Donald Trump at all, because that would mean going after the single largest budget items, and those are entitlements, Medicare, Medicaid, Social Security, and maybe even defense. If you don't take an axe to those four things, you're not going to make any meaningful progress. In fact, under Donald Trump, we went the opposite direction. When he was president, we had the largest deficit deficits in American history in peacetime. A feat that was admittedly topped under Joe Biden. But if Trump does what he says, he's going to do it. And he's going to reclaim that mantle in the very near future.

So think of, see, when it comes to the centralization of power, that's really what Corona is about. And that is something that both Biden and Trump exercised I would argue that they are the two most Peronist presidents the United States has ever had. And Argentina is led not by a conservative. It's led by a libertarian. Malay would not fit in with the American Republican Party of today or yesterday at all. The two countries are moving in different directions, with Argentina moving away from Peronism. And the United States moving towards it.