In the aftermath of political setbacks faced by the government in both parliament and among the governors, a pivotal turning point has unfolded in the story initiated by Javier Milei’s assumption of the presidency.

Since then, the political landscape has become a fast and tumultuous journey. The timeline of the crisis has ushered in a period of urgent demands — a pressing call for the government to speed up its agenda, and at the same time, an imperative for the working populace to set boundaries to this program, potentially leading to its comprehensive failure. Given the President of the Nation’s penchant for disruption, it is not unexpected that, within the intricate web woven by his own deeds and rhetoric, he endeavors to emerge triumphant (1). In essence, not by decelerating but by intensifying the pace. This resolve became evident in his recent address during the inaugural session of the National Congress last Friday (01/03).

Strategizing the Political Chessboard

At platforms such as the Conference on Political Action in Washington and the World Economic Forum in Davos, the president elucidated his political-economic vision in theoretical terms. Central to his proposal is fiscal equilibrium, venerating the market as the arbiter of all values and elevating private property as a right that transcends all others. Concurrently, he places a premium on the role of monopolies while diminishing the State to its minimal form. During his recent address in Congress, he operationalized these foundational principles into tangible policies.

This meticulously staged speech was an exercise in organization, characterized by a profound class-oriented narrative and a triumphalist spirit devoid of humanizing elements. Through this discourse, the president not only seizes the initiative but also reinstates centrality, a strategy persistently employed since the electoral campaign, thereby shaping the political trajectory of the nation.

Political Construct: An In-depth Analysis

As elucidated in our preceding analyses, the ‘Milei experiment’ is drawing global attention, as it signifies the inaugural term of an anarcho-liberal assuming the presidential office. Beyond this intrigue, a new dimension surfaces—his methodology of political construction, considering his scant parliamentary representation, absence of territorial authority, and feeble party infrastructure. The ethos of ‘non-negotiation’ extends beyond mere fiscal constraints, symbolic tools like the chainsaw, or metaphorical allusions like the blender; it permeates the political realm itself. The President perceives himself as the custodian of immutable concepts, non-negotiable ‘truths.’ His demeanor exhibits a quasi-messianic fervor, portraying him as a chosen figure entrusted to the ‘forces of heaven.’ Consequently, compromise finds no place; his propositions are either embraced in their entirety or categorically rejected.

The strategy employed to fortify and broaden his ‘hard core’ involves a continuous construction of adversaries, encompassing a diverse spectrum from the established order to radicals, including unionists, social leaders, cultural figures, and any emergent challenges. Simultaneously, he emphasizes that his vision entails a radical, and hence profound, reshaping of the nation’s socio-political fabric.

This inclination is underscored by the 10 points he proffered as a Fundamental Pact—a reminiscent nod to the Washington Consensus of the 1990s—directed at the governors and slated for signing on May 25. Conditional upon the ratification of the ‘bus law’ and the fiscal package, this pact allows the redirected funds, following cuts, to flow to the provinces (2). Any insinuation of coercion is not mere coincidence; rather, it serves as a deliberate orchestration. All of this is presided over by a novel leadership paradigm, foreshadowing a power structure qualitatively distinct from its antecedents.

How effective can this be?

“Zero deficit is non-negotiable,” echoed Milei repeatedly, celebrating the attainment of a financial surplus in January, post-interest payments. He also praised the Central Bank’s ongoing dollar purchases, liquidation of interest-bearing liabilities, reduction of financial exchange rates, and the narrowing of the gap between exchange rates.

These accomplishments come from the implementation of an exceptionally stringent policy, targeting three key objectives: the reduction of monetary issuance to zero, the establishment of a fresh equilibrium in the relative prices across the economy (including exchange rates, tariffs, prices, and wages), and the enhancement of the Central Bank’s balance sheet.

Within this framework, the notion that the shock program is ‘exceeding expectations’ gains momentum. Forecasts anticipate a robust recession in the initial quarter, marked by declining demand and the prospect of lower inflation rates in February/March (15-17%). The recuperative phase is projected to commence in the second quarter, buoyed by an influx of dollars from the harvest. The anticipated outcome is an estimated annual decline ranging between -2.6% and -4.4% of the GDP. This trajectory is poised to serve as a preliminary agreement, paving the way for the suspension of exchange controls and the unification of exchange rates by mid-year. Consequently, the prospect of dollarization would become tangible.

Premature Celebrations?

Given this buoyant perspective, a pertinent question arises: Is the adjustment sustainable over the long term, recognizing the impermanence of the metaphorical blender? In the context of escalating prices, can the economy persevere without succumbing to a new devaluation, or at the very least, without a surge in the daily devaluation percentage? The waning demand may further precipitate a decline in fiscal revenues, potentially necessitating a secondary shock adjustment. Despite the Central Bank’s dollar acquisitions, reserves remain in the negative; thus, the question arises: How can a minimum of $20 billion be secured, a prerequisite for the prospect of dollarization? It is noteworthy that Milei explicitly emphasized that ‘his’ envisaged dollarization would, in essence, be a system characterized by ‘currency competition,’ akin to a form of convertibility. However, the advocacy for dollarization stems from its perceived dividends within his electorate.

Conditional Support

The International Monetary Fund (IMF) and the United States typically lend their support to the program, albeit contingent upon the enactment of legislation to solidify and address the needs of the most vulnerable segments of society. Additionally, they endorse the interests of the dominant class bloc, perceiving a historic opportunity to establish a durable power equilibrium favoring capital. However, their support is tempered by apprehensions that the ongoing recession could potentially escalate into a full-fledged depression or trigger conflicts between advocates of dollarization and proponents of devaluation. Furthermore, concerns linger regarding the impending power struggle for hegemony within the bloc, which is presently under the exclusive sway of financial capital. Notably, in his Congressional address, Milei refrained from making any reference to the realms of industry or internal trade.

Governability at Stake

Both factions are intensively focused on safeguarding governability, acknowledging the escalating tide of social reactions characterized by the emergence of new actors on the streets, encompassing cultural movements, a revival of neighborhood assemblies, and numerous sectoral strikes. This surge is both preceded and propelled by robust engagement from the left-wing political spectrum. In a span of fewer than three months, a pronounced erosion in the purchasing power of the popular income has transpired, leaving an indelible impact on domestic demand. Concurrently, there has been a downturn in economic activity, a contraction in the utilization of installed capacity within the private sector, and the initiation of layoffs and dismissals. The culmination of these factors is encapsulated in the alarming surge in poverty and indigence levels, presently standing at 57.4% and 14.2%, respectively, with projections indicating an exacerbation in February/March. A palpable risk of social disintegration looms large.

The clock is ticking relentlessly for both the government, which is under pressure to demonstrate tangible successes by mid-year before social discontent proliferates, and for the working class, necessitating prompt articulation of resistance to forge a trajectory toward an alternative future, steering clear of the imminent specter of social barbarism

Notes

(1) “Dos labirintos se sai por cima” is a metaphor coined by the novelist Leopoldo Marechal, referring to the unknown as a way to resolve a conflict. According to the Royal Spanish Academy, a labyrinth is “a confusing and tangled thing.”

(2) In its campaign against public spending to eliminate the fiscal deficit, the government also cut funds to the provinces, especially Chubut, one of the oil-producing provinces. This led its governor to threaten to close the valve that allows the flow of gas and oil to the rest of the country, and other provinces joined him. A political crisis with an unpredictable outcome, which, for now, was resolved by the judicial system, ordering the national government to restore the funds that had been cut.

Eduardo Lucita is the director of the Marxist magazine Cuadernos del Sur and a member of the Argentine group Left Economists (EDI) and the Fourth International.

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