A 25-Minute Case for Freedom
Trojan Horse not needed... Argentina's Javier Milei tells the Davos crowd what they likely don't want to hear... A 25-minute case for freedom... The heart of economic debate... A sign of things to come?...
'We are all eager to listen to you'...
So said Klaus Schwab, founder of the World Economic Forum, when introducing Argentina's newly elected President Javier Milei yesterday to a crowd of hundreds of the world's elite at the annual gathering in Davos, Switzerland.
He has "introduced a new spirit to Argentina," Schwab said.
It may even be true that the folks in attendance were eager to listen to the "outsider" libertarian economics professor who won office in hyperinflation-stressed Argentina in November. But Schwab couldn't have quite imagined what Milei would say over the next 25 minutes.
He began...
Today, I am here to tell you that the Western world is in danger, and it is in danger because those who are supposed to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism, and thereby to poverty.
Unfortunately, in recent decades, motivated by some well-meaning individuals willing to help others, and others motivated by the desire to belong to a privileged class, the main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism.
We are here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world – rather, they are the root cause. Do believe me, no one [is] better placed than us Argentines to testify to these two points.
It was like the people of Troy let the Greek army in their secure confines without a giant wooden horse needed for deception. Over the next 24 minutes, Milei ruthlessly detailed the threat that "collectivism" – in his mind, including socialism – presents to global economic growth.
Keep in mind this is a guy who has called for the abolition of Argentina's central bank... privatizing the pension system... and dollarizing the economy as a "shock therapy" to cure his country's triple-digit inflation.
The meat of the argument...
It was stunning. The Davos crowd was gathered for a conference with a "Rebuilding Trust" theme. Instead, Milei outlined the case for "freedom" and described how he was seeing its antidote in the West – and why that was such a dangerous thing...
He talked about how free-market capitalism has brought the world more riches and less poverty in the past two centuries than the previous 1,800 years...
He talked about the mistakes he said government leaders, many sitting in the crowd, have been making recently that stagnate economic growth by limiting free competition. Milei said...
If the state punishes capitalists when they are successful, they will destroy their incentives... This will harm society as a whole.
Successful entrepreneurs are the real heroes, he said. More regulations, on the other hand, create a "downward spiral" of more regulations that ultimately stifle growth, make people poorer, and leave people's lives at the behest of a "bureaucrat sitting in a luxury office."
There are no "market failures," he said, but broken models used by economists. (Timely, since we encouraged the U.K. economists just yesterday to drink more alcohol to better forecast inflation.) This leads to more, costly interventions to get it "right." Milei said...
With tools like printing money, debt, subsidies, control of the interest rate, price controls, and regulations to correct the so-called market failures, they can control the lives and fates of millions of individuals.
You might gather why Milei won office in Argentina in November...
Argentina, Latin America's third-largest economy, is a place where inflation... and hyperinflation... have defined everything about the country for decades. It started when "collectivism" began, according to the country's new president...
Thirty-five years after we adopted the model of freedom, back in 1860, we became a leading world power. And when we embraced collectivism over the course of the last 100 years, we saw how our citizens started to become systematically impoverished, and we dropped to spot No. 140 globally.
Two in five Argentines now live in poverty. Hyperinflation is all many have known.
But it wasn't always this way...
The people finally found someone willing to run for office who shared their angst.
When Milei was elected a few months ago, I (Corey McLaughlin) paid attention...
After all, while the U.S. has avoided catastrophic hyperinflation, the warts of our fiat-currency system have been on full display in recent years. Our inflation rate did hit a 40-year high – despite whatever good intentions our "leaders" might have – as a result of monetary and fiscal policy and trillions of stimulus dollars.
We even wrote an essay in June titled, "At Least We're Not Argentina," when talking about central banks still raising interest rates to fight inflation of the pandemic era. We wrote...
At least we're not Argentina... where interest rates are near 100% and inflation is above it [at 114% then and 211% annually now, its highest level in 32 years].
I recently met a doctor who left Argentina because of the hyperinflation there. He told me he once got in a taxi agreeing to pay one rate, and by the time he got out of the car, the payment was more expensive – not fun.
But upon Milei's election after that report, we didn't have much to say about whether it truly mattered beyond its borders... or certainly to your investment portfolio... or the short-term direction of the U.S. markets.
Then yesterday Milei was invited into the (elite) lion's den in Davos and told the political elite things they probably didn't want to hear... but are true. They couldn't not listen. I don't think it's hyperbolic to say it sounded like a watershed moment...
Video clips and quotes made the rounds in the financial media. As far as I am concerned, his argument for freedom has been entered into evidence in a monumental economic debate.
Milei ended his speech yesterday with a plea to "all entrepreneurs and businesspeople here, and for those who are not here in person but are following from around the world." He said...
If you make money, it's because you offer a better product at the best price, thereby contributing to the general well-being. Do not yield to the advance of the state. The state is not the solution – the state is the problem itself.
What's next?...
Milei was outlining debates that many in the U.S. and elsewhere are having – again. When does the government overreach stop? Will successful entrepreneurs or businesses be discouraged from innovating... from hiring... from making profits?
And how much will that matter to a business's bottom line over the long run, or to the health of a nation? Or is it all much ado about nothing?
Milei's message has been viewed at least 220,000 times on YouTube in the past 24 hours, as of this writing. (A transcript is also available here.) So regardless of your own political leanings, know that his positions could turn up elsewhere, perhaps in various shades, in upcoming elections around the world from populations grappling with inflation and stagnant economies.
I'm not sure if it's a perfect fit, but Milei is often compared with former U.S. President Donald Trump, who just won the Iowa Republican caucuses in the first notable result of the 2024 presidential race.
As our colleague Sean Michael Cummings wrote in a recent issue of the free DailyWealth newsletter...
This year marks a huge election year... and not just for the U.S.
In the next 12 months, more than 50 countries around the world will head to the ballot box – marking an all-time record. Around 4 billion people will be affected by these various presidential, legislative, and local decisions.
Many nations around the world are facing the same problems – more debt, more spending, more taxes, constant inflation, a wealth gap, a divide of trust between the people and their governments – in different forms and contexts.
I'm not naive enough to believe that one speech from one recently elected president calling for drastic overhaul will matter imminently to you and me... But at least the subjects that we so often tackle here were heard in the mountains of Switzerland.
I've heard from more than a few readers in recent years who believe the U.S. should abolish the Federal Reserve, like Milei wants to do with Argentina's central bank. The problems are real. And more consequences are likely to come. But was anyone in Davos really listening?
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A quiet day in the mailbag... What are your thoughts on Javier Milei's speech? Is it something or nothing? Let us know with an e-mail to feedback@stansberryresearch.com.
All the best,
Corey McLaughlin
Baltimore, Maryland
January 18, 2024