There are things that even the most optimistic among us could not have imagined happening. The vast majority of Argentine and world economists, if on December 10, 2023, they had been told that this government would achieve zero deficit, would have answered that it was impossible. And they would have believed even less that this zero deficit would be achieved mainly by cutting spending and with little increase in tax pressure. Historically, tax increases have been the way deficits were reduced in Argentina. This is not minor, because it was the State that was overspending; but it forced those who produce the country's wealth to make the adjustment, making it harder to emerge from the recession.
I believe that the only ones who could have imagined something like this were those who were at that moment within the Government, the Ministry of Economy, and those behind that program.
I also don't think anyone would have imagined the number of deregulation and state reform measures that were implemented, considering the limited political power with which Javier Milei took office.
Milei came to power with political power far inferior to that of Mauricio Macri. He had no governors, no mayors, and had very limited representation in Congress. Despite this inferiority, there were reforms that managed to pass through Congress: The Bases Law may not have been as good as that first proposal that was attempted to be approved, but it still represented a phenomenal advance, achieved with limited political power both inside and outside Congress.
If one compares that political power with what Macri had and how little progress was made during his administration, it is really hard to imagine that everything that has been done so far could have been accomplished. In any case, it is fair to acknowledge the support provided by Juntos por el Cambio. We are talking about state reform, deregulation, and fiscal balance. And we must also add something that happened much faster than most expected: the deceleration of inflation. Only the most optimistic had predicted a drop in inflation similar to what ultimately occurred.
The independence of the Central Bank as an institutional guarantee
On the other hand, the reform of the Central Bank's organic charter is fundamental. Because it is very important that the Central Bank has true independence from the Executive Power. The problem arises when political power tries to impose decisions on the president or the board of the Central Bank that those leading the institution consider wrong and that may also be prohibited by the charter itself. That is precisely what the current organic charter does not sufficiently guarantee.
We must not forget that the Central Bank is the one that issues our currency. Therefore, every time its assets are degraded, as has happened so many times, the backing of that currency is also being degraded.
Some say that a law can be modified by another law. That is true. But a future government that wants to use the Central Bank again to defraud us with the inflation tax and finance excessive spending will have to change that law, and that will force a public discussion.
There it will depend on the civic maturity of Argentine citizens. If we massively defend the independence of the Central Bank and decide that we do not want to be defrauded again, the political cost that a government attempting to do so will have to pay will be extremely high.
Other countries also went through decline
But there is something deeper that we should understand: Argentines tend to consider ourselves the center of the world, and the truth is that we are a country lost in the south. We also think that everything that happened to us never happened anywhere else. And that is not the case.
Institutional degradation, including the degradation of economic institutions, has occurred in many countries around the world since the 1930s and 1940s. Some continued through the 1950s and beyond.
The difference is that the vast majority of those countries, during the 1970s and 1980s, even under socialist governments, began to realize that this was not the way to go.
