In December 2023, as the sound of a chainsaw echoed through Buenos Aires, Javier Milei swept into the Casa Rosada, and pro-market Austrian School economists cheered his victory. Nearly three years later, many libertarians are disappointed. They keep asking themselves: Did they vote for Rothbard, only to get another central planner?
He campaigned on a platform that was not merely reformist but explicitly abolitionist. He promised to end the Central Bank, dollarize the economy, and rein in the interventionist state. The Central Bank of Argentina (BCRA) still opens its doors every morning. The government did not lift restrictions on moving foreign currencies until April 2025. To an orthodox libertarian, all of this might still look like central planning.
That criticism has divided free-market thinkers, including Austrian economists. Hans-Hermann Hoppe, for example, has criticized Milei for not acting radically enough. Milei responded sharply in an interview and accused Hoppe of lacking sufficient knowledge of monetary economics. Milei argued that the demands for immediate change ignore important risks, such as hyperinflation.
Milei believes that poorly timed good policy can lead to the worst outcome. He believes that the path to a free market must begin with ending persistent budget deficits, not lifting capital controls. He hopes this approach will advance his political agenda while limiting political tensions and inflation risk.
Milei’s background as a macroeconomist explains his thinking. In this sense, his approach is technocratic because he prioritizes the economic conditions needed to achieve his free-market goals, even if that requires more nuance than his ideological promises.
The Sequencing Dilemma: Why the Fiscal Anchor Came First
Milei’s predecessor, Mauricio Macri, had allowed money to move more freely into and out of Argentina, but was very slow to reduce deficit spending, hoping to avoid the “shock therapy” necessary to close the budget gap. Under his administration (2015–2019), the government continued borrowing heavily, making the whole system vulnerable when global investors pulled back in 2018.
Argentina fell into a severe debt crisis. Gradualism had failed.
Lifting the restrictions without addressing deficit spending could also trigger high inflation. Argentines could exchange pesos for US dollars more freely, increasing demand for dollars and weakening the peso. Investors might also worry that the government would print more pesos to finance its deficit. That fear could accelerate the peso’s decline. The Central Bank could try to defend the peso by selling its dollar reserves, but that would drain the country’s foreign reserves instead. As a result, Milei made the “chainsaw” — deep cuts in government spending — the precondition for lifting restrictions.
Winning the War of Attrition
Achieving a fiscal surplus in Argentina was a political battle. Every cut created winners and losers, and the losers had strong reasons to fight back. The Milei administration declined to implement the 2025 public university funding law, for example, leading to protests. Provincial governors opposed the loss of government transfers, with one governor threatening to cut off energy supplies to the rest of the country. Labor unions also organized protests against Milei’s labor law reforms. Each group hoped Milei would retreat or make someone else pay, perhaps through higher taxes on businesses and wealthy households.
Argentina desperately needed to reduce its spending. But no group wanted to make the cuts. So they tried to wait one another out, hoping someone else would bear the cost. Economists Alberto Alesina and Allan Drazen described this as a war of attrition. If groups refuse to concede, the result is paralysis. Everyone knows spending must be cut, but no one wants to do the cutting.
Milei tried to convince governors, unions, and legislators that pressure would not make him abandon the goal of a zero deficit. At the 140th anniversary of the Rosario Board of Trade, he explicitly declared that the zero deficit was non-negotiable. Similarly, he insisted on the slogan No Hay Plata (there is no money) at the beginning of his term. He vetoed laws, froze public infrastructure projects, and ignored governors’ threats. These moves were more than budget measures. They signaled that waiting for Milei to blink might not work.
Short-Term Austerity for Long-Term Stability
Milei also framed the conflict as a fight against “the caste,” his label for the political establishment, rather than a fight against ordinary Argentines. He acknowledged that the cuts would hurt in the short term, but argued that continued deficits risked hyperinflation.
Milei also made spending cuts easier to accept by spending more to protect some vulnerable groups. Amid the austerity, he expanded the Universal Child Allowance and Food Cards and offered severance to state employees who lost their jobs. The early inflation figures gave Milei a powerful argument. Monthly inflation had reached 25.5 percent in December 2023. It fell to 2.4 percent in November 2024. They provided evidence that the sacrifice was working.
Milei’s experience shows that pursuing a free market requires more than ideological conviction. Governments must address the economic problems that stand in the way, and the order in which they introduce reforms matters. Abstract slogans cannot replace a strategy grounded in a clear understanding of a country’s economic constraints.
