Today, Explained - “Make Argentina Great Again!”

Episode Date: February 28, 2024

US inflation feels bad until you look at Argentina’s, which is breaking 200 percent. Today, Explained’s Sean Rameswaram reports from Buenos Aires, where residents are divided over their new anarcho-capitalist President Javier Milei’s shock therapy. This episode was reported by Sean Rameswaram, produced by Miles Bryan, edited by Matt Collette, fact-checked by Laura Bullard and Jesse Alejandro Cottrell, engineered by David Herman with help from Rob Byers, and hosted by Noel King. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Last November, Today Explained did an episode about Argentina's runoff election. On one side, you had a colorless economic minister. I mean, Sergio Massa has about as much charisma as a wooden plank. On the other side, a chainsaw-wielding, mutton-chopped anarcho-capitalist who cloned his dead dog five times. And guess which guy won? Javier Millay won, and this past weekend, Noel, he paid us a visit in Washington, D.C. at CPAC. On stage, he was talking about his economic agenda. Backstage, he was awkwardly hugging Donald Trump.

They kept repeating this refrain that they're going to make Argentina break the game. Back home, he's inflicting a ton of economic pain on Argentines, and the majority of them are okay with it. At least that's what we heard. So, Sean, I put you on a plane and sent you to investigate. I went all the way to Argentina to find out what their crazy inflation can teach us about ours, and I'm going to tell you all about it on Today Explained. Bet MGM, authorized gaming partner of the NBA,

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You leapt headfirst into the economic crisis in Argentina. Where? Yeah, I started in Florida. Florida Street, Buenos Aires. It's the sort of center of currency exchange in the city. All you hear up and down the street is... It means change. Everyone is offering change. All these people yelling cambio, they call themselves arbolitos, which means little tree.

And I asked one arbolito why. Edgar the arbolito says he's called a little tree because he's stuck all day working in one spot until someone wants to do some currency exchange. That's when he'll take you to a close by cueva, which means cave, but in this case, the cueva looks more like a janky Western Union. And people exchanging what for what? They're exchanging Argentine pesos for U.S. dollars. This is probably the biggest black market for U.S. dollars in the country, maybe in the hemisphere, it's illegal because they're changing currency for a different rate than the official government rate.

But literally no one cares. There's cops everywhere just watching this happen. Everybody's doing it. The second Argentines in Buenos Aires get paid, they figure out their budgets, how much they need for groceries, how much they need for the nanny, what have you. And then they try and convert the rest into a stable currency so they can save, a.k.a. U.S. dollars. It's estimated that Argentines have something like 250 billion U.S. dollars in cash under their mattresses stowed away. And people are especially in need of arbolitos right now because inflation is out of control and prices for everything are jumping just about weekly. Give us an example of that. Yeah, let me tell you actually from my own personal experience. I was in Argentina

reporting this story. Everywhere I go, there's no spice. There's no hot sauce on the table. It was very painful for me, but one day I'm walking by this small scale, whole foods type, little natural grocery store, and they have all the things I've been missing in Argentina. They've got my hot sauce. They've got my oat milk. They've got my spicy water. But what they don't have is any prices listed anywhere, not a price in sight. Sorry, are they just winging it? Are they just winging the prices? They're not. No, they know what everything costs, but none of the customers do. So if you want to know, you have to ask. But I didn't because I wasn't trying to be like the annoying foreign guy in the store where no one else was asking. I just picked up like six items took them to the counter and my total was 42,000 pesos which is like

over 40 bucks and then I really wished that I had been the annoying foreign guy asking what each and every item had cost. Several days later I decided I had to go back to Natural Soho, this grocery store in this neighborhood called Palermo, to ask Marcelo Gomez, who runs it. He said his store had been operating for six years, so I asked him if the prices had ever gone down in that period. Never. Since I was born, prices have never gone down. But prices had been displayed at Soho Natural until recently, until Millet entered office. It's a little uncomfortable for the client to have to ask us.

They don't like doing it. It doesn't bother us. But we see that they don't like doing it. There's no alternative. All right, so you have a situation in which Argentina has terrible inflation. Javier Malay trots into office saying he's going to make the economy better. And what you're telling me is instead, office in the first place. People wanted to change. But he actually promised that things would get worse before they got better. This is something he's calling shock therapy. The bottom line is there's no alternative to austerity and no alternative to shock treatment. Feel the pain now so we can reap the gains later.

So Malay gets into office and immediately cuts government spending, lays off thousands of government employees, cuts transit subsidies, and probably most important of all, he devalues the Argentine peso. He cuts the value of the country's currency in half to bring the government rate

closer to what people are getting from that black market on Florida Street. We have inherited what we call a repressed inflation that is already unfurling. And that, as I explained earlier, is a consequence of the lag of the ultra-expansionary monetary policy of the last four years and of price controls that never work in the long run. Which meant everything immediately got way more expensive for everyone. Inflation shot up to 250 percent and more than half the country now is living under the poverty line. For a few months, we will be worse off than before, particularly in terms of inflation.

All right, so he made a promise. People elected him. He made good on the promise. It's going to get bad. And what's been the response? Are Argentines furious? Hell yeah, they are. In fact, labor groups and a ton of state employees and students who feel like their jobs or benefits or status were under attack banded together to stage a historic general strike on January 24th. What was it like? What did you hear?

I was most impressed, firstly, by the fact that it felt like a political protest, yes. But it felt like it was mixed with Mardi Gras or something. There was chanting. There was music. People were, like, moshing. There was pyro. People were drinking. People were smoking.

There were posters of Che. There were posters of Evita. And there was a retiree named Eduardo Maramu walking around chanting something very specific. Which means, I need shade. I need shade because it was a super hot, sunny day. But he seemed hilarious, so I asked him why he decided to come out. He said he didn't want to sell off the country. Millet wants to privatize just about everything and sell off Argentina's natural resources to the highest bidder. There was

another guy Juan Nunez who was walking around banging on a casserole dish. He's called a casserola. I asked him what he was doing out there on that hot day. I come every day. Seriously? Yes, every day. I come every day to play the casserola at 8pm. And he said he was actually out there every day. He was protesting this huge omnibus bill Malay was and still is trying to pass

that would completely cut a bunch of state agencies slash energy subsidies and extend his executive powers. Malay wants to be the king. He wants the power of Congress. That's why I protest. I'm a liberal thinker. I want there to be a budget surplus so that taxes come down, but I wouldn't make myself king to do those things. We have democracy. The legislative branch, the executive branch, the judicial branch are all supposed to share power. Millet wants all the power to himself.

I heard this particular critique over and over from young and old and worker and retiree and student. Most countries try to protect their industries and protect their own. This man is not doing that. What he's doing is increasing hunger, poverty and inequality. Okay. And yet a majority of Argentinians decided when they voted for the president, this is the guy we want, the guy who wants to privatizeist, hardcore libertarian cook right now? Basically, outside of the general strike, almost all I heard was that, you know,

we should give him a chance. I heard this from a guy named Facundo at a Japanese cafe just off Florida Street. At least he's an economist. He's also an expert. That should be enough to make a solid foundation for the country's economy. I heard this from Claudia back in Palermo. We have to give him some time, right? He just took office, so we'll see. He has four years to govern and to show what he can do if we follow his policies. So we'll see in four years.

And I heard this from Marcelo back at the grocery store with no prices. A country like Argentina, which is a rich country in so many ways, if everyone goes along with this plan to make things better, we'll all benefit. Time and again I heard from Argentines who, whether they proudly voted for Millet or held their noses while they were doing it, or whether they didn't vote for him at all, they were willing to suffer through his shock therapy to see if his policies might work in the long term. And it wasn't just people I spoke to. Polling suggests that even though half the country is now living in poverty,

even though prices everywhere are going up, a majority of the country wants to give Malay a chance. And you're gonna tell me why when we come back. You're gonna have me back? Sure am. Do you want to change it? Do you want to change it? Support for Today Explained comes from Ramp. Ramp is the corporate card and spend management software designed to help you save time and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250

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This Giving Tuesday, you can support the ACLU. With your help, they can stop the extreme Project 2025 agenda. Join the ACLU at aclu.org today. It's Today Explained. We're back with Sean Rameshram. Sean Rameshram. It's pronounced Rama Swami. Okay. In these United States, Sean, inflation hit about 8% two years ago. It felt very high. It was very high. But meanwhile, you're telling me that under Argentina's president, Javier Millet, inflation peaked above 200 percent.

And yet you got people out in the street telling you, let's let him do his thing. Let's see what happens. How? Why? What? I asked Mariana Luzzi. She's a sociologist based in Buenos Aires who writes a lot about the economy in Argentina. She actually wrote a whole book about it. She said if you knew Argentina's economic history, you would not be

surprised by people's support of Millet right now. So for us, inflation, it's a very particular thing. I think that we fear, of course, but compared to the time when we had 3,000% inflation a year, this situation, it's not the worst we can imagine. Like 3,000% inflation. We cannot forget that Argentina, in living memory, had 3,000% inflation. Jesus, Murphy. Is that recent? This was in the late 80s, Noel, when you and I were listening to The Cure or whatever. It was after a series of unsuccessful economic programs from left-leaning governments that this country found itself in, like, terrible economic shape.

You go to the supermarket in the morning and the prices of the groceries are at some point. And when you go back in the afternoon, the prices are different, are higher. People couldn't buy food, so they were stealing it. It was a chaotic time, but the government manages to recover by pegging the Argentine peso to the U.S. dollar. One dollar equals one peso. That works for a while, until there's a recession and people start trying to pull out

all their pesos from the bank to convert them into dollars. They scream at, deface, and kick the metal sheeting shielding bank windows. The banks don't want to return us our money. They want to rob our money. The government freezes people's bank accounts. People cannot take their own money out of the bank.

They turn what was, at the beginning, deposits in U.S. dollars to deposits in Argentina's pesos, not respecting the original equivalence between the two currencies. Eventually, people are allowed to access their savings again, but by that point, their pesos had lost half their value. One of the headlines Washingtonians are waking up to this morning from the Washington Times, Argentina beyond the brink. Argentina is in a freefall. Its economy is shattered. It can't pay its huge debts at home or abroad. Its political leaders are befuddled and desperate. Military leaders are grumbling. There's looting, rioting, and death in the streets, and nobody sees the end

of it yet. I try to imagine Joe Biden confiscating savings accounts. It'd be January 666 out in D.C. Would never happen. Would never happen. We hope. But in Argentina, you're talking about things that happened in the 1980s, long before I was born, in the 1990s, in the 2000s, still a long time ago. What's been going on more recently? Well, Noel, do you remember the global COVID-19 pandemic? I knew her well, yeah. It was rough everywhere, as you'll recall, but it was extra rough in Argentina because they didn't just like have pandemic-related inflation. They were going into the pandemic with inflation. Inflation was already around 45% a year in 2019. So when the pandemic hit and all these inflation-related problems started to be a concern everywhere else in Argentina, we already had a quite serious problem with inflation. So the situation, of course, got worse. And actually, during the pandemic, when everyone was just

sitting around watching TV with nothing to do, There was this guy with a funny haircut and huge sideburns who would show up on all the talk shows talking mad smack about the leftist government and its policies and how everyone was corrupt and needed to be chased out of office. And guess who it was, Noelle? Um, what's his name? Javier? Javier? Javier Millet nailed it.

They are desperate. They are losing the cultural battle. The shitty lefties are cornered for the first time. The shitty lefties are cornered. Millet got on the TV and said, look at what these corrupty lefty governments have wrought. Their policies are bunk. Their economies are bunk. Their economies are bunk. And fast forward to December 2023, he becomes the president in a runoff election.

Mr. Melayne, known as El Loco or the madman, pulled off a major upset. Provisional results show the self-styled anarcho-capitalist won with 55.7% of the vote compared to 44% for his rival. Voters were so cynical about politicians' ability to deal with inflation that they were willing to try this far-right, anarcho-capitalist, tantric sex teacher. Who got elected not because he's great and bad, he might be, but he got elected because he was like, I can fix the economy. I've got a program here. You're down there. Are you seeing any evidence that Millet's program is working? You know, it's early, but he has had a few small wins already. The country has more cash on hand

and it's got a little less debt. But as far as how people are responding, a lot of people say he's still in his honeymoon phase. He entered office in December and then people immediately went on vacation. It was Christmas. It was New Year's. It was just Carnival. Kids are only now going back to school and parents are just getting back to business in Argentina. So it's in March that people think we might see how the country really responds to how hard a hit they're taking economically. And we'll see where it goes from there. I mean, it's tempting to think we might find something instructive here. Inflation is on the top of everybody's mind in the United States. But you're talking about a country that has experienced in our lifetime 3,000% inflation. Argentina seems to just be Argentina, which is not to

discount or give up on Argentina, but there's not like a lesson here, is there? I think there is, yeah, courtesy of my sociologist, Mariana Luzzi. One of the things that is very important is to not consider inflation as the only problem. One of the problems with inflation is that it keeps all the attention, it gets all the attention. It appears to be as the main feature we have to attack, as the only problem, as the only concern we should have. And what Argentina's history tells us is that you can solve the problem of inflation

and still have very heavy economic problems. Argentina's got plenty of other problems beyond inflation. They've got government debt coming out of their ears. They've got government spending problems that Malay's trying to address. Malay wants to deal with all of this stuff. But at this point, it doesn't seem like he's terribly capable of building coalitions in Congress to do it. He doesn't have experience. He's antagonizing. He's learning on the job. And he's still got a lot of learning to do.

But one thing that's working in his favor is that Argentina has kind of seen it all. Here, nothing makes sense. Everything is like a lottery. It's fun sometimes because sometimes you win the lottery. But in general, you lose. This is Marcelo again from the grocery store with no prices. Even after everything his country's been through, he has faith in his government.

He has faith in its institutions. We have to be patient and wait. Anyways, we made our choice democratically. This is the system of government we have. We chose a president so that during his term he would lead the country and we have to respect that. We will have the opportunity to vote again and show whether he did good or bad. It was kind of incredible to me that this dude who runs a grocery store with no prices on display,

where prices are doubling month to month, was advocating for patience. That he still had time for patience. So as Americans go to the polls in November and are thinking about inflation and debt and spending and a paralyzed Congress and potentially a leader that only half of us really want. Do you think we should remember Marcelo and Argentina? I think so. I mean, I was constantly comparing everything I was hearing and seeing in Argentina to what we've got in the United States, not just because Millet is making all

this noise, but because, you know, 8% inflation in 2022 was pretty shocking for a lot of Americans. And I don't want to knock that response. It was comparatively bad for us. But when you compare it to what the rest of the world went through, what the rest of the world is still going through, it's not that bad. And then you look at how the United States has rebounded. Most countries would love to be in the state the United States is in right now. So it's going to be interesting to see how much inflation influences voters in November versus how much they'll think about everything else. Because just like in Argentina, just like most anywhere in the world, there is a lot more on the line. Today explains Sean Ramos-Furham. Thank you, Sean.

Thank you, Noelle. Sean Ramos-Furham reported today's show. Miles Bryan produced, Matthew Collette edited, Rob Byers mixed with David Herman, who also remixed. Laura Bullard and Jesse Alejandro Cottrell fact-checked. And Sean, you have some people to thank. Ana Lankes, Amanda Aranchik, Lucia Cholakianarera,

and Facundo Iglesias. And Mariana Luzzi's got a book called The Dollar, How the U.S. Dollar Became a Popular Currency in Argentina. There's also, of course, the original Spanish version, El Dolar. Might be especially worth reading considering another one of Millet's plans to dollarize Argentina's economy. I'm Noelle King. It's Today Explained. you