New Argentine President Javier Milei's austerity measures seem to be working. After coming into office in December, Milei introduced shock reforms that included balancing the budget in one fell swoop, massive deregulation, and devaluing the currency by 50%.
You won't believe what happened next, which pointedly did not include the economic collapse that the usual fearmongers warned would happen.
According to a new AP report, Argentina's worst-in-the-world inflation slowed down to a 13.2% monthly (!!!) rate in February, "compared to 20.6% in January and 25.5% in December."
AP is quick to remind its readers that "on a yearly basis, however, inflation remains the highest in three decades, topping 276.2% in February." I'd remind my readers that Milei's reforms have only been in effect for two of the last 12 months. The man only assumed office in December but, as Milei himself promises, he's just getting started on turning his long-suffering nation into a capitalist paradise.
The press keeps using Milei’s description of himself as an "anarcho-capitalist" as a sneer but when was the last time any of them cut monthly inflation in half in just two months?
Never, that's when.
There will be bumps along the road. Once inflation has been set loose, as I've been reminding readers here and on Instapundit for the last three years, it is difficult and painful to bring back under control. Introducing austerity might be the least of it, too. The political temptation is all too strong to relax just as soon as inflation returns to a manageable level — but that's when it often comes roaring back. You've got to keep a wet towel on those embers until the very last of them is fully extinguished.
You have to err on the unpopular side of easing up too late instead of too early, and that's never easy for any politician, no matter how principled they might be. Polls are polls and there's always another election on the horizon.
But when it works, it works gloriously. When he came into office in 1981 after a decade of brutal inflation and economic stagnation, Ronald Reagan gave Fed chief Paul Volcker the political cover he needed to provide similar shock treatment to the U.S. economy by jacking up interest rates until people screamed and keeping them there. The Reagan-Volcker Recession (really the Jimmy Carter Recession) was brutal, but it worked. Inflation was tamed, and the economy came roaring back.
Reagan bet his entire presidency that he could whip inflation — and create an economic boom — well before his 1984 re-election. Not only did it work, but it worked spectacularly. In the six years that followed the '81-'82 recession, America created an economy the size of West Germany's (then the second-largest in the world) and just kind of casually tacked it onto the one we already had.
Repeat after me: Austerity for government means prosperity for people.
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