Written by Albertina Robinson-Welsh
Illustrated by Keo Morakod Ung
After two decades of left-leaning populist governance, Argentina entered a new political era with the election of President Javier Milei in December 2023. Prior to their election, the country was facing two persistent traumas: triple-digit inflation and long-term economic stagnation. However, upon taking office, Milei pledged a radical free-market agenda to address Argentina’s longstanding economic challenges. Yet, nearly two years into his presidency, the effectiveness of his libertarian policies remains much debated.
Milei’s shock therapy
When Milei first entered office, inflation stood at 211% – the highest in the world at the time, and prices were rising every month by 13%, peaking at 25% just after he became president. “There is no money”, Milei claimed repeatedly and insisted there was “no alternative” to the sweeping austerity he was about to introduce. Within weeks, his administration eliminated bureaucracy, reduced public sector jobs, dissolved entire government departments such as the Ministry of Transport, Education, and Women, Genders and Diversity and ended government subsidies in gas, electricity and transport.
Fiscal Impacts and Early Economic Gains
The impact on the fiscal budget was immense. Government spending fell by 28% and for the first time in more than a decade, Argentina finally recorded a budget surplus.
With the central bank no longer needing to print millions of Argentine pesos as it did during its previous Peronist era, annual inflation fell. By mid-2025, inflation dropped to 43.5%, with wholesale prices falling by 0.3% this May (the best figure in 17 years). The country was also rapidly being lifted out of poverty, declining from 52.9% in the first half of 2024 to 38.1% in the second, with data from UNICEF estimating that 1.7 million children were no longer living in poverty.
Despite Milei inheriting what government spokesperson Manuel Adorni described as “a disastrous situation… perhaps one of the worst that a government has received in history”, Milei’s libertarian policies managed to encourage a wave of investor confidence and were beginning to reshape Argentina’s economic future.
The Hidden Social Costs
Notwithstanding the early success of Milei’s policies, the Argentine economy continued to stall and masked behind falling poverty rates, unfortunately, was growing inequality. In December 2023, Milei devalued the Argentine peso from 391 to 800 per US dollar as part of his “economic shock therapy”. Yet, while this move intended to make Argentine exports more competitive, it also raised the cost of a total basic basket (CBT), food and non-food essentials that were imported, particularly for those living on the lowest incomes. Combined with government spending cuts to welfare programmes, these measures have greatly contributed to widening inequality, with many claiming “the middle class no longer exists; you’re either poor or rich”.
The elimination of nine government ministries, despite increasing efficiency, also reduced 34% of all public sector jobs. As of this June, unemployment in Argentina rose to 7.9%, the highest it has been in four years. This, of course, was not met without frustration. In recent months, the country has seen a surge in nationwide social and violent unrest, particularly from marginalised and left-wing groups.
Moreover, Milei’s singular pursuit of lowering inflation has heavily weighed on Argentina’s economic growth. After decades of GDP being artificially fuelled by vast amounts of government spending, the austerity measures needed to control Argentina’s hyperinflation have slowed down the official estimates of growth in the country’s economy. Activity only expanded by 2.5% in August of this year, down from 6.1% in June and 2.9% in July.
Milei’s Midterm Victory
Nonetheless, for some Argentines, this did not impact their voting decisions in the country’s most recent elections. Javier Milei managed to lead his party, La Libertad Avanza (“Freedom Advances”), to another landslide victory in Argentina’s mid-term elections this October. He won with almost 41% of the vote and increased his deputies from 37 to 93, compared to only 31% of voters who supported the left-wing Peronist opposition. Milei succeeded in tripling his representation and thus power within parliament, despite his party only being founded in 2021, and the widespread discontent of the president depicted by the media.
Many of his voters acknowledged his party’s mistakes, particularly when it came to welfare spending cuts, yet believed that with more time in power, Milei could resolve the country’s economic issues. Yet, arguably more important to the success of La Libertad Avanza was the rejection of Peronism, still widely present across the country. Many Argentines, especially farmers and producers (a key group of voters), are relying on Milei’s market-based economic policies to open the country’s agricultural sector to the rest of the world, in contrast to the protectionist export quotas and tariffs that former President Cristina Fernández de Kirchner had imposed while she was in power.
Overall, there seems to be no strong consensus amongst Argentines on whether Milei’s free market reforms have truly benefited their economy. However, there are very few voters who wish to return to the Peronist legacy of soaring inflation and economic volatility. In addition, since Milei’s midterm win, Argentine stock, bond and currency markets have all surged. Therefore, perhaps with more time in office, Milei could genuinely deliver the “economic miracle” he has been promising his country since his election.
UCL Rethinking Economics 