How Milei’s ‘Thatcherite’ economics divided his nation – but won over Trump

Argentine President Javier Milei’s radical economic overhaul, drawing comparisons to Margaret Thatcher’s policies, has created deep divisions within Argentina while winning him the admiration and financial support of US President Donald Trump. Milei, a libertarian outsider, rose to power in December 2023 amid hyperinflation and economic crisis, promising to ‘chainsaw’ the state by cutting ministries, subsidies, and public spending. His rallies featured symbolic chainsaws, emphasizing his intent to dismantle what he called ‘la casta’ – the political elite. The reforms have yielded macroeconomic successes: inflation has plummeted from over 200% to around 36%, and Argentina recorded its first fiscal surplus in 14 years. International lenders and investors have regained confidence, with Trump hailing Milei as ‘my favorite president’ and providing a $20 billion currency swap to stabilize the peso. However, the social cost has been high. Widespread protests have erupted, with police using tear gas and rubber bullets. Cuts to pensions, education, health, and infrastructure have hit ordinary Argentines hard, leading to job losses and reduced disposable income. Critics argue the adjustments burden the working class, not the wealthy. Trump’s support was explicitly tied to Milei’s political survival, as the US president warned that if Milei’s coalition loses in the upcoming midterm elections on October 26, the US would not ‘waste our time’ helping Argentina. This intervention aims to sway voters and prevent a return to socialist policies, but it has also highlighted the political risks. Milei’s lack of political experience has been both a shield and a weakness. His detachment from traditional politics allowed him to implement harsh measures, but it has also led to a loss of popular support, spooking markets. Recent corruption scandals and poor performance in provincial elections have added to the uncertainty. The economy remains fragile, with Argentina facing $20 billion in debt repayments next year. While the US lifeline provides temporary stability, some economists warn that if social unrest continues or debts cannot be paid, the economic gains could unravel. The midterm elections will be a critical test of public patience. Internationally, Milei’s experiment is watched with fascination. Some, like UK Conservative leader Kemi Badenoch, see it as a ‘template’ for future governments. However, the political fallout in Argentina serves as a cautionary tale about the trade-offs between fiscal discipline and social welfare. As Argentina approaches the elections, the nation is divided between those who see Milei’s policies as necessary medicine and those who suffer from its side effects. The outcome will determine not only Milei’s political future but also the sustainability of his economic reforms.