Leftists follow narratives. Conservatives follow facts. And very good conservatives follow facts even if they don't fit favored "narratives." 

Which brings us to Argentina, where the situation is very grim indeed. Despite electing a ferociously libertarian president in Javier Milei, Argentina ranks number one in most miserable countries on earth according to Hanke's Annual Misery Index, besting even perennial hellholes Venezuela, Cuba and Zimbabwe this year. That's a little disturbing even as we know that Milei got elected based on the failures of his socialist predecessors.

The narrative we are hoping for is not performing. So, we need to look again at facts.

Johns Hopkins University economics professor who created the annual misery index, Steve Hanke, explains the how and why in his latest collection of economic indicators that affect people where they are in their daily lives among things they can see.

First, his formula is 

HAMI (Hanke's Annual Misery Index) is the sum of the year-end unemployment (multiplied by two), inflation, and bank-lending rates, minus the annual percentage change in real GDP per capita. Unlike Okun and Barro, who focused on the United States, HAMI covers many foreign countries; 157 are included in the 2023 edition.

I described why this misery index is useful last year in this passage here.

Every element in it is geared to the little guy, not the big random macroeconomic numbers that are befuddling Krugman. Notice that Hanke says 'bank lending rates' instead of interest rates from the Fed or something, which to the little guy is abstract nonsense, while the cost of taking out a home loan or a gander at the old credit card bill is not. Notice that Hanke uses GDP per capita rather than the broader averages in GDP that don't quite describe how the individual is affected. So it's a good system, and in his piece, Hanke describes how he came to develop this system, polishing it with this deet or that tweak, in response to other distinguished economists' research.

Second, he lays out why Argentina ranked so low in his column in National Review:

Argentina’s HAMI = [(Unemployment (6.5%) * 2) + Inflation (211.4%) + Bank‐Lending Rate (95.9%)] − Real GDP Growth (-1.5%) = 321.8

It’s not surprising that Javier Milei surprised Sergio Massa, the former minister of economy, to win the presidential election last November. After all, Milei campaigned on a platform of mothballing the central bank (BCRA), putting it in a museum, and replacing the pathetic peso with the U.S. dollar. This, Milei promised, would smash inflation and stabilize the economy, setting the stage for much-needed free-market reforms.

The Argentine public bought Milei’s message and put him in the Casa Rosada. And why not? After all, inflation and the associated bank lending rate make up 95.5 percent of Argentina’s 2023 HAMI. Moreover, Argentines know that Ecuador, El Salvador, and Panama are dollarized and their inflation rates at the end of 2023 were among the lowest in the world, at 1.3 percent, 2.2 percent, and 1.9 percent, respectively. In short, dollarization is a proven inflation-killer, and the low inflation rates in the “dollarizers” make them much more happy than the most miserable country in the world, Argentina.

And yes, that is Milei's doing, not the commies' doing.

Hanke continued:

But, once elected, Milei changed course. He appointed Luis Caputo as his minister of economy. Caputo had briefly served as the minister of finance and president of the BCRA in the government of President Mauricio Macri, where he helped engineer what was the start of Argentina’s current crisis. With that, Milei has mysteriously shelved dollarization. Instead, Milei and Caputo have embraced what appears to be a standard IMF austerity program. It began with a 50 percent devaluation of the peso, which contributed to a surge in annual inflation to 276 percent (up from 254 percent in January and 211 percent in December) in February. Instead of crushing inflation with dollarization, Milei has delivered a classic devaluation-inflation tax.

Milei has been poorly advised. Dollarization is both desirable and feasible. Dollarization should have been the first policy that Milei implemented. That would have smashed inflation immediately, given Milei a big credibility boost, and made it easier for him to implement the rest of his agenda.

So he's gotten too close to the country's RINO equivalents as well as the International Monetary Fund which is famous for its austerity programs that leave nations' capitals in flames. The IMF doesn't care about the little guy at all.

The observation about Panama, El Salvador, and Ecuador doing better than Argentina because of their dollarized economies has to grate onto proud, developed Argentinians, who see beat-up little underdeveloped countries whose leaders have been, at times, not the brightest, doing better than they are.

Hanke emphasized, probably based on his long years of helping developing countries enact economic reforms of this kind, that the order of reforms is important, and it's important to start with a big bang and get all the main stuff out of the way immediately. That's the way to make major reforms stick, experience tells. While Milei has legalized all currencies, he hasn't gone to the dollar right away as he promised he would. He should have done that and killed the inflation monster dead, and taken the confidence boost.

Now his poll numbers, according to some polls at least, are falling, because people aren't seeing the change they voted for.

Sure, there is some change for the better with Milei in the saddle. We conservatives continue to root for him.

But the big one in Argentina is inflation, and there isn't significant change there. That's what Milei needs to focus on because that's what prompted voters there to go out of their comfort zones and elect him. He needs to think about that because if he carries on in a conventional sort of way, voters will feel betrayed, and libertarianism itself will be discredited. Worse still the population will move back to the socialists who at least can be trusted to do crony shovelouts. 

It's worrisome, really, because Milei was and is such a promising figure. But he won't stay that way if he continues dithering around on this. Move to the dollar and let the chips fall where they may. Ecuador jumped in on it blind as a bat, and now Ecuador is an economic success story. Milei needs to do that, too. The water may be cold out there, but Milei has got to take the plunge. 

Image: Pixabay / Pixabay License