French sociologist Raymond Aron visited Buenos Aires in 1960 and concluded that there were three types of economies: capitalist, socialist, and Argentinian. This observation remains true today. Argentinians struggle to understand Argentina, and foreigners find it even harder. Take the country’s political system as an example. Candidates in the presidential elections, which will be held this October, are selected in national primaries. Voting is obligatory, though a third of the population usually abstains. Much to everyone’s surprise, in the recent primaries held on August 13, an outsider and self-proclaimed ultra-libertarian economist, Javier Milei, came out on top. Milei is an admirer of Donald Trump, in method if not in substance; he addresses the public directly, emphatically, and with little regard for intermediaries such as Parliament, the media, or the judiciary.

How can someone be ultra-libertarian in Argentina? One important observation is that Argentina’s political vocabulary is so specific that it is impossible to explain the country through the prisms we are accustomed to using in the United States and Europe. Is Milei ultra-libertarian? He is, in that he has adopted the most extreme stances of mentors, economists, and philosophers such as Milton Friedman and Friedrich von Hayek, both of whom are immensely popular in certain Argentinian intellectual and academic circles. Milei therefore promotes a systematic return to the free market, while encouraging absolute distrust of anything relating to the federal government and the states (Argentina is a federal republic). Meantime, his flagship policy is the elimination of the Central Bank, which he blames for the 100 percent annual inflation rates that have become the norm in Argentina in the last 20 years. For the poorest citizens—around three-quarters of the population—inflation is a constant enemy.

Alongside his proposed dismantling of the Central Bank, Milei also wants to replace the local peso with the American dollar. This dollarization of the Argentinian economy already exists for the upper classes, whose daily transactions are carried out in U.S. currency. Their assets and resources are held in banks in Miami, and inflation has little effect on them. The same cannot be said for the poor majority of Argentinians who must make do with their own currency, the value of which drops slightly every day. For this part of the population, it is impossible to accumulate assets or even savings. Instead, their objective is to spend the day’s wages through official channels and more generally on the black market.

From an outsider’s perspective, Milei appears to be an extremist, yet he is part of a longstanding intellectual and political tradition. In Argentina, excess is good. Even Friedman would be seen as a moderate here. Many Argentinian intellectuals and economists espouse absolute free-market liberalism without the slightest state intervention or concepts such as public services, society, or social justice. This could be described as uniquely Argentinian free-market liberalism, which has no precedent other than perhaps in Chile during the dictatorship of General Pinochet and his Chicago Boys. 

Can typical voters really be reached by economic rhetoric, even if it does promote free-market liberalism? I think not, but this matters little. The main thing that the people of Argentina have sought for generations is a savior, a caudillo inspired by General Juan Perón. The former leader took power in 1946 and founded Peronism—Argentina’s dominant popular and political movement around which all elections revolve, even today. But what is Peronism? Is it right-wing? Is it left-wing? Is it free-market? Is it socialist? In fact, there are no clear answers to these questions. Peronism embraces its time, the moods of the moment, and the personality of its leader, who is expected to resolve every issue that society puts forward. Carlos Menem, who was one of Argentina’s most effective Peronist presidents between 1989 and 1999, summed up his electoral program with a simple catchphrase: “Follow me.” At the time, Menem was a free-market liberal in the American and European sense of the term. He admired Ronald Reagan and enjoyed some political success before becoming embroiled in a series of corruption scandals—another constant in Argentinian political life.

After three other leaders, Menem’s legacy was continued in 2003 by two other Peronists, Néstor Kirchner, and then his widow Cristina Fernández de Kirchner, though they were both illiberal and anti-American. Peronism is not so much an ideology or a manifesto as a form of patriotism. Most Argentinians consider that Argentina is their country but not necessarily their motherland. The nation’s most famous twentieth-century writer, Jorge Luis Borges, liked to say that he was not Argentinian but British because he was more comfortable speaking English than Spanish. (The nanny who raised him spoke English.) This confession was tongue-in-cheek, but it is a common opinion. Many people, particularly elites, define themselves more by their heritage—Spanish, Italian, German—than by their local roots. Claiming to be Peronist means declaring oneself to be Argentinian above all else, something that the General, and especially his charismatic wife Evita Peron, knew all too well. Being Peronist means forgetting both migratory background and ancestry to align one’s destiny instead with that of the nation. Peronism is a nationalism that fits with any electoral manifesto, so long as it is nationalist. Any self-respecting Peronist will passionately follow the local soccer team and even support Pope Francis, if only because he is Argentinian. Peronism is therefore undefinable other than as a national sentiment.

Other Argentinian political movements are no easier to define. Most are right or center-right, the many political parties often change their names, and they are generally morally and socially conservative while supporting a free-market economy. The Left was powerful during the 1970s and even threatened the government with the help of a Cuba-funded guerilla army. The resulting civil war led to a military coup, mirroring the events and the reasons for these conflicts in neighboring countries such as Chile, Brazil, and Uruguay. Peace was restored, and no one dared question the country’s democratic institutions.

The non-revolutionary Left once defined itself as radical, but the Radical Civic Union party has all but disappeared. There may be a left wing in Argentina today, but not with any real power. However, there is a form of left-wing Peronism: a vaguely social-democratic movement whose presidential candidate is Sergio Massa, the governor of Buenos Aires. But socialism is no longer a banner to be waved, and these supposedly left-wing Peronists have been careful to name themselves the Justicialist Party.

The next presidential election will therefore be a choice between three candidates: Patricia Bullrich, who can be described as a conservative, tough on crime and immigration; Sergio Massa, the vaguely socially minded Peronist from the incumbent Justicialists; and the outsider, Milei. Voters will be casting their ballots based less on manifestos and more on the hope that one of these candidates will finally prove to be the right caudillo.

If the past can teach us anything, we can expect the Argentinian people to be disappointed once again and to become increasingly poor. The generalized impoverishment of the country is largely due to Argentina’s own institutions. The federal states enjoy considerable financial independence from the central government. This allows their governors to spend freely, since the Central Bank is obliged to make up their deficits. Argentina’s constant national deficit, its monstrous debt, its inability to repay the IMF, and its growing number of bankruptcies are essentially due to how the country is organized. Lavish local spending is tolerated and carries no risk of sanction. In this respect, Milei’s promise to abolish the Central Bank and adopt the U.S. dollar makes sense. This is not the first time this proposal has been put forward. But it has always met with stiff resistance from Peronism, which sees it as a betrayal of national sovereignty.

What do the state governors do with this public money? They do not build schools, hospitals, or roads. Instead, they spend most of the money on social welfare, a system that more or less benefits the public, and which offers most people their sole means of survival. The economy is in tatters, the industrial sector has virtually been wiped out, and the agricultural sector employs less and less labor. Welfare is therefore a meal ticket, and for local politicians also a direct or indirect way of buying votes and securing election or re-election. Interestingly, neither Milei nor his opponents have raised this topic, for fear of alienating the poorest voters and local public authorities.

How can we explain the fact that around 40 percent of the population lives below the poverty line? Paradoxically, this is the result of the enormous success of Argentinian farmers and breeders. Soy and wheat, the country’s two main export products, are grown in Argentina using the most sophisticated scientific and capitalist methods. Major farm operators are above all entrepreneurs. They are no longer, as they once were, owners of vast plots of land employing an army of underpaid rural workers. Today, they rent land for a season and hire the most efficient machinery rather than recruit poor workers. They use the most advanced agricultural techniques and embrace the full spectrum of the globalized market. They switch from one crop to another based on demand, particularly from China. As a result, the poor have become the biggest victims of this high-tech agricultural evolution because their labor has become redundant.

One might expect the huge margins generated by these cutting-edge methods to be reinvested in new businesses. Yet this is not the case, because agricultural entrepreneurs hardly feel Argentinian and fear the government, which has repeatedly confiscated their profits and even seized their bank accounts. Any reinvestment is hard to calculate because no one really knows what he earns. It is in their interest to declare as little as possible because Argentina is the only country in the world to tax its own exports. This completely counterproductive tax encourages deception, but these surpluses and exports are the only things that the central government has to tax. In Argentina, an old joke says that an agricultural entrepreneur who earns $100 on the Argentinian market will deposit $200 into his personal bank account in Miami.

Will the next caudillo be able to restore some social equity and spark a national, even nationalist, resurgence among entrepreneurs? President Carlos Menem came close. If Milei is elected, perhaps he will be able to achieve it, so long as he tones down his incendiary speeches and wild promises. No one can know for sure.

My analysis of Argentinian society is obviously simple and somewhat superficial. It may contradict the experiences of casual travelers for whom Argentina is a pleasant and inexpensive destination. After all, Buenos Aires is one of South America’s most beautiful cities. Mimicking the most beautiful districts of Paris and built in the 1920s, when Argentina was one of the richest countries in the world, Buenos Aires certainly looks the part. Yet it is little more than a relic. By night, the city is stalked by street kids who empty garbage cans to collect whatever they can sell on the black market. As soon as you leave Buenos Aires, poverty is everywhere. In the past, such as during the 1970s, the situation could have been described as revolutionary. But while caudillismo remains an ancient, enduring tradition of endless promise, revolution in Argentina is no longer something anyone believes in or desires. Cuba and Venezuela are dissuasion enough.

One wonders why Argentina doesn’t follow in the footsteps of two of its more economically successful neighbors: Chile and Brazil. Historically, Chile is a nation of small landowners and has never had a landed aristocracy comparable to that of Argentina. These landowners have since become entrepreneurs and successfully conquered global markets. Though Brazil is highly unequal and divided along racial lines, it is nonetheless an empire with a strong sense of belonging and citizenship. To go back to the previous joke about Argentina, it is said in Brazil that an entrepreneur who earns $100 will deposit only $110 in Miami. The rest will be spent in his own country. This is because Brazilians are Brazilians, first and foremost, while Argentinians are not Argentinians, but instead from here and there, waiting for a savior.

Economists have coined the term “emerging economy” to designate developing countries. For Argentina, I believe “submerging economy” would be more accurate. I hope that I am wrong. I love this country, but it never ceases to disappoint me.

Photo: rarrarorro/iStock


City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).

Further Reading

Up Next