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While agreeing with Javier Milei’s reforms, this opinion piece asks if he got the order wrong. Up front, what’s not to like about Milei firing tens of thousands of government workers, his shuttering of 9 out of 18 government ministries, and his freezing of various government projects?

Milei did right because government is an economy-sapping cost. Governments only have money to spend insofar as the private economy has fewer resources at its disposal, and that emanate from the government's power to tax produciton. 

Applied to the U.S. Treasury, it can spend more than any other government in the world, and it can borrow more than any other government in the world exactly because it has taxable access to the production of the most productive people in the world. Government spending does not drive economic growth, but is an effect of it. 

Milei yet again has slashed government functions and employees, but the fact that there was lots of government to shrink signals that underlying all the policy errors that Milei was elected to fix, there was a real economy in Argentina. Hence the question about the order of Milei’s reforms.

As you’re reading this, it’s said that Milei and his Liberty Advances coalition might be in trouble. Which is odd since freedom logically correlates with economic growth.

At the same time, even in free nations growth is uneven. While the skyline in Dallas shimmers, there’s no equivalent in Brownsville, TX. Buffalo, NY is the embodiment of “rust belt” while 373 miles away, New York City booms. The obvious difference is people. The people part is worth considering with Argentina.

It’s said that roughly 2.5 percent of Argentines live outside of Argentina, with the majority of that 2.5 percent in the U.S. and Spain. The number might at first seem small, but as Warren Brookes (1929-1991) observed long ago, we’re blessed by the genius of the relatively few. Referencing another wise economic thinker who is happily still with us, the bet here is that Reuven Brenner would nod along to the likelihood that a substantial majority of Argentina’s “vital few” don’t live in Argentina.

All of which isn’t meant to heap disdain on Milei’s policy fixes, but to yet again wonder if the order of them was mistaken. Rather than leading with government employee layoffs and the shuttering of ministries, Milei might have done better by literally putting them all on paid leave so that they could no longer harass existing businesses, while at the same time promising both Argentina’s existing private sector workers and vital expats permanently low taxation on income and investments as a way of retaining the talent that’s already there, and luring some of the most vital talent back from the U.S. and Spain.

Some will say government shrinkage was necessary to revive a debased peso, but government spending has nothing to do with the latter. Furthermore, the dollar liquefies substantial amounts of economic activity in Argentina as is. Notable here is that the return of Argentina’s vital few would act as a magnet for exponentially more dollars than “dollarization” ever would. As for the government being broke, Brookes was right that no individual, business or government ever runs out of money, they just run out of investor trust. The return of the best people would have solved Argentina's money problems. 

Milei’s apparent electoral troubles indicate that he would have done better by focusing on improving the lot of Argentina’s most productive first, all the while luring the best and brightest back. The prosperous combination would have bought Milei the credibility to reduce the very real burden that is government in more politic fashion.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His next book is The Deficit Delusion: Why Everything Left, Right and Supply Side Tell You About the National Debt Is Wrong


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