Javier Milei Must Sideline Economists, Embrace Henry Hazlitt

It only took Javier Milei a couple of days in office to trip up. This is worrisome, both for Milei and Argentina. Think the 50% devaluation of the Argentine peso. About it, an obvious response is that peso devaluation isn’t relevant given the market reality that Argentina is already in effect dollarized as this column has written, plus it’s useful to point out that devaluation was acceptance of existing market reality more than anything. 

Still, it has to be asked what Milei felt the devaluation would achieve? If we ignore the negative economic implications of currency devaluation (more on them in a bit), we can’t ignore the abject stupidity of such a move. Money is but a measure. Nothing else.

As Adam Smith so pithily put it centuries ago, “the sole use of money is to circulate consumable goods.” In which case, Milei’s mindless move is the equivalent of a would-be NBA player shrinking the inch in order to report greater height to NBA scouts. No scout would be fooled, and just the same no one is fooled by currency devaluation. Milei is supposed to be the antidote to inflation, yet one of his first acts is inflationary.

The reply from economists and policy types will be that Argentina has debts, and devaluation will shrink them. Ok, but Milei is supposed to know better. Yet if he knew better Milei would understand that no individual, corporation or country ever runs out of money, rather all three can only run out of investor trust.

Which just means that if Argentina is low on money, the only answer is economic freedom. Freedom correlates with prosperity, and will make settlement of debts an effortless notion. By using devaluation as a tool of default, Milei is showing either that he doesn’t get it, he’s being advised by too many economists, or both.

All of which calls for the new Argentine president to return to first principles, and in particular to a non-economist whose work Milei is likely familiar with: think Henry Hazlitt, author of Economics In One Lesson.

About Hazlitt’s essential book, easily the most important line in it is one that is never mentioned as the most important line. Still, if Milei internalizes it he’ll soon be back on track, and by extension so will Argentina be.

Hazlitt crucially wrote that “what’s harmful or disastrous to an individual must be equally harmful or disastrous to the collection of individuals who make up a nation.” Hazlitt was making the easily-glossed over point that economies aren’t blobs, or machines, or tangible objects that can be “stimulated” by the state, rather economies are just people.

Once this is understood, economics becomes much more than basic. Think about it. Reduced to the individual, it’s then easy to see why prosperity for a country’s economy is so blindingly simple. Regarding taxes, no individual has his or her economy improved the more that the state shrinks that individual’s economy via taxation.

As for regulation, no individual’s economy is improved the more that work time is spent answering up to officials of government instead of producing real value. With trade, no individual’s economy is improved if talented people across the street or on the other side of the world are not allowed to produce for that individual, or not allowed to produce alongside that individual.

With money, no individual earns dollars, pounds or Argentine pesos as much as individuals earn what dollars, pounds, or Argentine pesos can be exchanged for. Individual economy is shrunken by currency devaluation as the fruits of our work purchase less, after which the jobs we do are a consequence of investment. And when investors commit capital to ventures, they’re purchasing future returns in dollars, pounds, Argentine pesos, or name your medium. It’s just a reminder that currency devaluation is disastrous for the individual in too many ways to count.

Lastly, government spending. As Milei has preached, government has no resources. It only has what it’s taken from – yes – the individual. Which means no individual is harmed by reductions in government spending simply because the individual has to be relieved of wealth first so that the government can spend.

What’s important about these basic truths that emerge from an obscure line in Hazlitt’s book is that they require no PhD. in economics, or realistically any kind of education to understand. The non-economist in Hazlitt was just preaching common sense.

Prosperity is so simple, and it’s rooted in freeing the individuals who comprise Argentina’s economy from the bad ideas that spread like wildfire among economists and the politicians they advise. Milei’s success hinges on these truths. Let’s hope he sidelines economists in favor of Henry Hazlitt.

Republished from RealClear Markets


  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

    View all posts
Scroll to Top