This past Wednesday, President of Argentina and libertarian firebrand Javier Milei came to speak at Stanford for an event hosted by the Hoover Institution and the Stanford Graduate School of Business’ Classical Liberalism Initiative. You can find the full Javier Milei Stanford speech here with English subtitles, as well as a Twitter/X thread summarizing the speech here.
His address comes at a perilous time in Argentina's history as the nation has grappled with debt crises and inflation for decades, needing to be bailed out by the IMF several times, despite once being one of the wealthiest countries in the world per capita during the earlier part of the 20th century. Nearly a century of statist or “Peronist” policies, such as command-and-control regulation and export controls, have devastated Argentina’s economy. Argentina's Gross Domestic Product per capita stands at $13,650 as of 2022, versus $76,329 in the United States.
Enter Javier Milei, a former economics professor turned politician. Milei once taught university-level economics before becoming a private sector economist, and then became a celebrity through Argentine political television news, ultimately propelling him to the presidency. His political rise was broadcast through videos, widely shared on social media, of Milei using a chainsaw to symbolically slash government bureaucracy and throw away the names of government agencies he hoped to dismantle. His trademark phrase, “Viva la libertad carajo,” translates to “Long live f**king freedom.”
Milei's speech at Stanford was one of the most technical speeches given by a political leader I have ever seen. The hour-long talk was largely a summary of his new book, "Capitalism, Socialism, and the Neoclassical Trap" released last month. Those expecting an address surrounding Milei's life story or the pro-market policies Milei plans to implement would be disappointed. True to his professorial form, the speech was a deeply academic lecture on topics such as economic history, general versus partial equilibrium, the dangers of excessively trusting models over reality, and a criticism of how economists have justified state interventions.
The speech is one you would more expect to see in something like an academic seminar, rather than a talk from a politician. Diving into esoteric subjects such as the Kakutani fixed point theorem and praising the Austrian school of economics while decrying Keynes, the talk impressed in both its depth and range.
The ever-relevant, broader point of the speech that Milei made is the dangers of economic models when they stray from reality. As an empirical economist myself, this sentiment is music to my ears. To be sure, models have an important role in simplifying economic phenomena for us humans to understand a very complex world. But when models become too detached from reality they lose their value, and worse, can induce policy changes with potentially catastrophic consequences.
Milei’s second argument was the degree to which modern economics has used the concept of "market failure" to justify increasing amounts of government intervention without enough caution regarding unintended negative consequences for incentives and economic growth; it is possible that "government failure" is just as important to consider as "market failure" in the market analysis you learn in the Stanford introductory economic classes. For example, when a country imposes a carbon tax (like in Canada under Justin Trudeau’s government) do we really precisely know what the social cost of carbon is so that we are confident in what the optimal carbon tax or amount of regulation would be to meaningfully deter carbon emissions inducing climate change without ravaging the economy? Many more examples exist beyond just climate regulation.
That said, I would personally disagree with Milei’s most bold statements, such as "market failures do not exist." Spillovers (or "market failures") do exist and often can. If a chemical company dumps poisonous chemicals into a stream affecting the water supply, other people are harmed. For instance, decades of toxic chemical dumping into Love Canal near Niagara Falls, New York, resulted in the deaths of many. Some regulation indeed is needed to deal with such obviously negative spillovers to protect people through clearly defined property rights (in the case of Love Canal, anti-dumping laws). In fairness to Milei, he spoke in his speech about having rigid property rights and the need to find "second-best" regulatory and policy solutions.
The most political moments of the speech involved discussing why heavy-handed state intervention had been politically in the 21st century in Argentina, Uruguay, Chile, Paraguay, Brazil, and Colombia; he said current Spanish President Pedro Sanchez is "like a sister" to intellectual rival past Peronist Argentine President Christina Kirchner because like her, "he doesn’t have any manners." Milei said that he loves politics because "I love conflict.” Milei also referenced watching Magic Johnson play for the Lakers against the Celtics many years ago and complimented the Lakers on their yellow and purple colors which are the colors of his own political party, Partido Libertario.
The speech is historic because Milei represents a large, growing political movement that is a backlash to rising pro-state interventionist parties in the aftermath of the COVID-19 pandemic. In his speech, Milei said "the world is waking up to freedom" and that for this reason, his rule of Argentina is important—not just to the history of Argentina but to the history of the world. Other free market-oriented politicians like Canadian Conservative leader Pierre Poilievre and New Zealand Prime Minister Christopher Luxon are on the rise. Even the ascendant Labour Party in the U.K. under Keith Starmer’s leadership has returned to more market-friendly policies to an extent.
Several other Stanford students and fans wearing various Argentina soccer jerseys got to briefly take selfies with Milei as well before he left to continue his meetings with other Silicon Valley leaders (the trip has included largely meetings with Big Tech CEOs including Sam Altman, Tim Cook, Sundar Prichai, and Mark Zuckerberg, in what seems to be a signal on the part of technology companies of a desire to demonstrate openness to ideological diversity, something which much of the tech industry has struggled with for many years).
There remains great uncertainty about the degree to which Milei will be able to change the trajectory of Argentina's economy. In a massive political victory for Milei, Argentine inflation has fallen to single digits since Milei has taken office. Whether he can continue to muster the political coalition and will to pass legislation turning back decades of Peronist policies remains unclear.
Milei, above all the flair, slogans, and intellect should be commended for giving the Argentine people the ability to try something different when it comes to economic policy after decades of economic failure under Peronist regimes. In other words, hope.