By Michael Every of Rabobank
Milei-nnials and no Gen Zzz
As noted yesterday, the weekend saw “another political earthquake” as radical conservative libertarian Javier Milei, who dresses as a superhero, publicly attacks “leftards”, and wants to “burn down” the central bank and shut down most government ministries, was elected president of Argentina. Milei also wants to dollarize – with no dollars. Where one could once argue Argentina is a radical economic and political outlier, it now looks like a potential precursor: now, DM = EM.
Yes, it’s no surprise that in a two-horse presidential race, the incumbent who saw inflation hit 143% y-o-y lost, and it’s no shock Argentina continued a LatAm tradition of political swings from one extreme to the other in the hope that it might help the public live slightly better. Yes, given Milei doesn’t have a Congressional majority, he may not be able to achieve what he wants to do.
Yet the extreme policy being embraced –dollarization, massive austerity, and “burning down” the central bank, so ceding monetary and most fiscal sovereignty– is remarkable. It speaks to fury, desperation, and a recognition that nothing traditional works anymore, so taboos must be broken. The same is true elsewhere, as a ‘Milei-nnial’ generation emerges.
Republican presidential candidate Vivek Ramaswamy is also proposing to fire 50% of the federal bureaucracy if he were to win, and Republican front-runner Trump wants to impose uniform tariffs on all imports, deport millions of illegal aliens, and remake the education system – this time with an organised parallel bureaucracy to ensure he can do what he says, rather than pressing a button and watching nothing happen.
In Europe, the far right party of Geert Wilders is expected to do very well in the Dutch election; Germany is now talking about deporting people en masse; populist Meloni is already in power in Italy; Spain is seeing huge street protests against its new government; and the UK continues to gaze radically at its political navel, with a government that presses buttons and watches nothing happen.
Meanwhile, after ‘Milei-nnials’ there is no Gen ‘Zzz’. The West’s streets and universities echo with Cliché Guevara calls for the end of racism, imperialism, colonialism, and capitalism – and cheers for Hamas. Recall T-shirt staple Che killed hundreds of people, by the way.
Outside the West, China is embracing Marxist Common Prosperity, which US executives are prepared to give a standing ovation to at $40,000 a head dinners, as Russia tries to make itself great again on the map. It’s not the only one – Iran has its own regional agenda. (Note Iran-backed Houthis seized an Israel-linked commercial ship; and Turkey is planning a 1,000-ship civilian flotilla from 40 nations, including Russia, to blockade Israel’s port of Ashdod.)
In short, we see not just emerging radical libertarianism but nationalism, fascism, imperialism, Marxism, and Islamism – and radical fusions of many of the above into a new angry melange.
The sensible center that repressed such 20th, 19th, 18th, 17th (and 9th, 8th, and 7th)-century thinking for a few decades is now unable to help us. Indeed, you can’t repress ‘-isms’ with inappropriate policy any more than you can repress market volatility with inappropriate state interventions, as Milei would no doubt argue. Both attempts just change volatility’s form, and it comes back even worse.
Understand that our new, old ‘-isms’ didn’t come roaring back randomly; people didn’t just get tired of winning; history might run in circles or waves, but not on autopilot; and you can’t keep blaming Trump or Brexit in a vacuum. Instead, as I’ve argued since 2016, the sensible center’s policy utopianism ensured other ‘-isms’ would re-emerge eventually. And now what once worked as policy no longer does:
Fiscal austerity? Great! Except the welfare state is already collapsing, radicalising voters, as the Climate Policy Initiative says green spending needs to be TEN TIMES what it is now to hit crucial targets. And defense spending needs to leap everywhere too. Indeed, on Bloomberg yesterday, Niall Ferguson asked, ‘What if we had a new cold war — and we were the Soviets?’, as he warned, “For some months, I had been worried that, despite reassuring words from my Chinese sources, a plan was being hatched in Beijing to impose such a blockade in January, using the Taiwanese election to furnish a pretext.” That’s something to consider as the KMT/TPP alliance for the Taiwanese presidential election unraveled since Ferguson wrote his article.
Rate cuts? Great! Except it could mean a surge in commodity prices and higher structural inflation given the political and geopolitical state of play. Argentina may be walking away from joining the BRICS now, but a Great Game with BRICS commodities and Chinese goods vs. Western financialisation and the US dollar is clearly underway.
Make house prices rise again? Great! If we want to entrench emerging feudalism and ensure Gen Z who already moved from being fans of Harry Potter to Hamas next move to ISIS.
Free trade? Great! Except it often means deindustrialisation, inequality, openness to coercion, and military weakness.
Dedollarise? Great! Except that will shatter the global system entirely.
Dollarise? Great! Except you lose most key forms of economic sovereignty.
Reverse Brexit? Great! But the UK would still be a member of an EU grappling with mass legal and illegal immigration, unaffordable housing, crumbling civil services, high public debt, high inflation, high rates, weak economic growth, an energy crisis, deindustrialisation, two nearby wars, social and political polarisation, and structural geopolitical weakness leading to long-run economic decline.
Of course, markets try to ‘find a way’. Argentinean assets traded in New York soared Monday despite (or because of) the radical policy proposed. The same thing happened when Trump won in 2016: initial shock and sell-off, then a rally. Clearly sometimes the sensible center is not what people really want even when they say they do.
Then again, sometimes there is no way to find good news. Markets haven’t liked China’s Common Prosperity, and wait for Western Keynesianism that won’t arrive. Wall Street is shocked social justice can end up in antisemitism even when measuring which demographics make up what percentage of which professions was always a trapdoor to it. Wait until they grapple with what “dekulakisation” implies as it re-emerges in the circles backing “decolonisation”.
In Argentina’s case, @RobinWigg tweets: “I never thought leopards would eat MY face,” says investor who bet on the Leopards Eating Faces Party’s president-elect turning around an economic basket case with policies out of a teenage libertarian’s notebook.”
In short, expect more radical populism and more radical market volatility as Milei-nnials and no Gen Zzz grapple with which way to yank the policy steering wheel to try to avoid what they see as a cliff ahead.
(And, in the background, enjoy the clown-show drama around OpenAI: how can so much artificial intelligence be shrouded by so much lack of human intelligence?)