Is Milei's Economy Working? Argentina's Shock Therapy, Two Years On

On 10 December 2023, Argentina shocked the world. A man widely written off as a total outsider, given almost no chance of winning, ascended to the presidency. Standing before his countrymen, the fiery disruptor Javier Milei declared that the country had reached a turning point: “Today begins the reconstruction of Argentina. Today begins the end of Argentina’s decline. The model of decadence has come to an end. There is no way back.”

Almost nobody knew quite what to expect. With his unkempt hair, leather jacket, and a chainsaw he liked to brandish at rallies, supporters and critics alike called him “El Loco” — the madman. He promised to drag Argentina out of the economic spiral it had been stuck in for years, armed with radical anti-establishment ideas drawn from a long career in economics and a set of stalwart libertarian values. The message from voters was unambiguous: Argentina needed change.

Milei agreed, declaring that “there is no room for gradualism, or half-measures.”

Key Takeaways

Javier Milei inherited an Argentina with annual inflation that hit 211.4 percent in 2023 — the highest in the world — and a budget deficit equal to 5 percent of GDP.
His “shock therapy” package included eliminating energy and transport subsidies, cutting roughly 48,000 public-sector jobs, slashing ministry budgets, and devaluing the peso by 50 percent.
By the end of 2024, Argentina recorded a government surplus of 1.8 percent of GDP — a budget surplus the country has seen in only 13 of its 123 years.
Annual inflation fell from 289 percent in April 2024 to 39.4 percent by June 2025, with monthly inflation dropping from 52 percent in early 2024 to 1.5 percent in May 2025.
The human cost was severe: poverty peaked at 57.4 percent in January 2024, infrastructure spending fell 74 percent, healthcare 28 percent, and education 52 percent.
UNICEF reported child poverty fell 14 percent by July 2025, lifting an estimated 1.7 million children out of poverty — though more than half of Argentina’s children remained poor.
Critics warn about Milei’s use of presidential decrees and vetoes to bypass Congress, and his administration’s ties to figures from Argentina’s military dictatorship.

Now, with roughly two years in office behind him, the question is whether the gamble has paid off. Has the enigmatic leader been vindicated as a mad economic genius, or exposed as a stubborn fiscal fool? The answer, as it usually is with Argentina, sits somewhere in the middle — and the trade-offs are still being weighed in kitchens and workplaces across the country.

This is the story of how a leather-jacketed economics professor took a chainsaw to one of the world’s most chronically unstable economies, and what ordinary Argentinians paid, and gained, in the bargain.

A Country on a Fiscal Rollercoaster

To understand how an outsider like Milei reached the peak of Argentinian politics, you have to understand the country itself, and especially the wild ride its economy has been on for the past half-century. According to the Council on Foreign Relations, between 1860 and 1930 Argentina ranked among the ten richest countries in the world per capita, ahead of France, Germany, and Italy. In the 43 years leading up to 1914, The Economist notes, its GDP grew at an annual rate of 6 percent — the fastest recorded anywhere on earth.

That growth was built on a vast agricultural and farming industry rooted in huge, fertile grassland plains. Exports of crops and minerals made Argentina more than four times richer than its neighbour and rival Brazil. Business was booming, and the future looked golden.

But the golden age did not last. Across the 20th century, Argentinian decline set in, marked by six military coups between 1930 and 1976. The 1989 election was the first time in more than 60 years that a civilian president handed power to an elected successor — a measure of just how deep the political instability ran.

Decades of Boom and Bust

With political instability came economic instability. Starting in the 1970s, and continuing to this day, the country lurched through repeated crises, most dramatically under Isabel Perón. Argentina suffered several bouts of hyperinflation, first in the 1980s and more recently in the early 2020s. Triple-digit inflation was recorded from 1975 to 1977, 1981 to 1985, 1987 to 1991, and again in 2023 and 2024.

In 1989 specifically, hyperinflation reached a staggering 3,000 percent. In 2001 and 2002 the country went through yet another collapse, with only minimal reform to show for it.

Across that long span, Argentina worked through 23 IMF programmes and nine debt defaults, and GDP per capita barely moved in real terms after the late 1970s, despite the regular booms and busts. A relative recovery in the mid-2000s was choked off by anaemic growth after 2011. Productivity growth between 2012 and 2024 rose above zero only four times. GDP per capita stagnated hard, the peso’s value fell off a cliff, and the country slid into recession in 2018.

In short, modern Argentina has often been, in the words of more than one frustrated observer, a “total clusterf—k.” Nor did the pandemic help. The economy rebounded 10.3 percent in 2021 after a 10 percent contraction in 2020, but remained below pre-2018 recession levels in 2022.

Pearls and Egg Prices: Life Under Hyperinflation

By 2023, Argentina’s annual inflation was the highest in the world at 211.4 percent — and some estimates put it closer to 300 percent. To put that in perspective, when American voters were upset about 9 percent inflation under Joe Biden, that figure would have looked almost enviable in Buenos Aires. While Americans were clutching their pearls about egg prices, Argentinians were struggling to afford to eat at all, as wholesale food prices rose by 50 percent.

Compounding the chaos, the country maintained 14 different exchange rates, each tied to the sector of the economy a person happened to work in. Every fluctuation in the wider economy sent ripples of confusion through this tangle of rates, making it almost impossible for businesses and households to plan.

This is why the rollercoaster metaphor fits so well. There were peaks and valleys, booms and busts. Argentina’s booms were repeatedly accompanied by generous welfare programmes the government could not afford to sustain. When the inevitable busts arrived, they hurt everyone and left an unstable foundation on which it proved extremely difficult to grow. Something, clearly, had to change. Something new was needed to break this perma-crisis. Into that vacuum stepped Javier Milei.

The Economist Who Became a Phenomenon

Milei was no ordinary politician — in fact, he had never been a politician at all. He wore a leather jacket to his rallies, and with his messy, unkempt hair he looked, as one wry description put it, like a fifth Beatle born of a love affair between Ringo Starr and a deranged cattle rancher. But beneath the showmanship sat a serious academic record.

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Milei had decades of experience as an economics professor at multiple Argentine universities, including the University of Belgrano, the University of Buenos Aires, and the Argentine University of Enterprise, writing more than 50 academic papers by 2016, according to the World Economic Forum. He specialised in macro and microeconomics, mathematics, and economic growth. He served as a senior economist for HSBC Argentina, worked with the international chamber of commerce, and led the economic studies division at the think tank Fundación Acordar. If anyone had the academic credentials to diagnose the Argentinian economy, it was him.

He did not talk like a politician, partly because he moved from academia to the media first. His firebrand commentary became appointment viewing. He would yell at politicians, storm off set in a rage, and rail against the bipartisan establishment that, in his telling, had locked Argentina into an economic doom loop for decades. People were angry about their country’s decline, and they saw that same anger reflected back at them in Milei.

A Radical and Contradictory Worldview

Milei did not fit the usual political typologies. Some describe him as an anarcho-capitalist — a label he embraces himself — while others call him a hyper-libertarian or even a far-right populist. There are elements of all these labels in his politics, but more than anything, he was simply Milei: a singular figure who held positions for principle rather than popularity.

He often railed against populism as a cheap political distraction. He was anti-communist, pro-gun, and prized individual freedom above all else, but he lacked the nationalist streak of other right-wing leaders in the Americas like Donald Trump and former Brazilian president Jair Bolsonaro. His admiration for Margaret Thatcher — a deeply unpopular figure in Argentina, with the Falklands War still in living memory — captures his willingness to put principle over public mood.

Almost every view Milei holds is extreme in one direction or another. He has floated reforming the prison system to resemble El Salvador’s under self-proclaimed “coolest dictator ever” Nayib Bukele, describes environmentalism as a post-Marxist agenda, and has said it should be legal to sell babies and human organs. Yet he is not opposed to same-sex marriage, which he frames as a contract like any other, and he has a record of supporting total drug legalisation within a free society. His rallying cry — “Long live freedom, damn it!” — sums up a man for whom liberty must come at any cost.

Shock Therapy: Subsidies, Jobs, and the Chainsaw

Milei’s most prominent concern was always the economy, and his prescription was extreme reform. The belief was simple: shrink the size of government and its role in the economy, and free-market trade would succeed unfettered. He campaigned on dollarizing the economy — replacing the peso outright with the US dollar — privatising state-run enterprises, slashing taxes, and cutting public spending by up to 15 percent of GDP. The chainsaw he wielded at speeches was a literal symbol of his commitment to cut government bureaucracy and spending.

Upon taking office, he set about it immediately, warning the country in his inaugural speech that pain would come first: “There is no alternative to a shock adjustment,” and “There is no money.” One of his first actions was to eliminate energy and transport subsidies, which had dragged on the economy since they were introduced during the crisis of the new millennium. By 2015, energy and transport subsidies had reached 5.7 percent of GDP — over 10 percent of primary government spending. They had been pared to around 1.4 percent by 2019, but Milei killed the programme altogether, causing the price of the Buenos Aires metro to spike 360 percent overnight in May 2024.

The savings were real. By September 2024, energy cuts over the first seven months of the year had saved $2.7 billion to reduce the deficit. The transport savings are harder to quantify, but in both cases the cuts translated directly into higher prices for ordinary citizens in an already difficult economy.

Slashing the State

The cuts to government itself were sweeping. Milei eliminated tens of thousands of public-sector jobs — the Buenos Aires Times reported a loss of 48,000, equivalent to 9.6 percent of all public-sector jobs in the country. The Ministries of Transport, Public Works, Science, Territorial Development and Habitat, Culture, Environment, Tourism, Livestock and Agriculture, and Women’s Affairs were all folded into newly created ministries or departments and had their budgets and staff numbers slashed.

Supporters saw this as the justified “chainsaw-ing” of wasteful government, not unlike the attempted DOGE program in the United States. Critics argued he went too far, pointing to high-skill workers like scientific researchers reduced to driving taxis. The previous left-leaning Peronist governments believed such ministries should be a visible, well-funded part of public policy; Milei’s economic pragmatism held that there simply was not enough money to afford them. His response to objections was pure free-market libertarianism.

Told that public research was valuable, he shot back: “If you think your research is so useful, go to the market like any other citizen — publish a book and see if people are interested.” Such arguments risk a brain drain, where other countries are happy to take in those researchers. The free market giveth, and the free market taketh away.

Infrastructure spending was also frozen, costing 50,000 construction workers their jobs between November 2023 and February 2024, according to Reuters. Milei ordered all public-works contracts audited, claiming heavy corruption. The Ministry of Public Works saw its budget cut by 93.5 percent, and the National Highway Directorate by 75 percent.

Defending the approach, Milei argued that “no politician gets involved in any long-term project, because they cannot get any political gain from it… I’m the only one who speaks of an economic program designed for 35 to 50 years. If you get stuck in the short term, it all ends badly.”

Pensions, Welfare, and a 31 Percent Budget Cut

Milei also drastically reduced public-sector pensions and welfare programmes. A series of decrees led to a steep drop in public pensions, and he blocked their rise again, insisting there was simply no money to pay for them and branding the lawmakers who tried to reverse him “fiscal degenerates.” Meanwhile, the ending of the Monotributo scheme — a system designed to help informal workers transition into the formal economy while providing health care and pension access — left hundreds of thousands of people in the informal economy without protections like healthcare, their path to formalisation blocked. Under the replacement system, only 152 people successfully transitioned into formal employment despite over one million workers being transferred into the programme.

In total, the budget cuts and austerity have been incredibly harsh. Infrastructure spending dropped 74 percent, education 52 percent, social development 60 percent, healthcare 28 percent, and federal assistance to Argentinian provinces 68 percent. Argentina’s entire budget fell from 87.75 billion pesos in 2023 to 60.76 billion pesos in 2024 — a fall of 31 percent in real terms. And that is before accounting for the most controversial change of all: what happened to the currency itself.

Ripping the Band-Aid Off: The Peso Devaluation

When Milei entered office, two of his biggest goals were to dollarize the economy as soon as possible and to “blow up” the central bank, in his own words. In theory, doing so would bring Argentina’s massive inflation down and align the peso with its real exchange rate, easing the budget deficit. Milei claims the central bank exists only to take money out of Argentinians’ hands and enrich elites, while dollarization would strip politicians of the ability to simply print more money — a temptation he believes they cannot resist.

After getting into office, Milei called for a sudden 50 percent devaluation of the peso, sending the exchange rate from 400 to 800 per US dollar. He then introduced a “crawling peg,” where the peso would decline further by one percent per month. Once it was sufficiently devalued, he introduced a band system, allowing the peso to float freely but within an exchange rate of 1,000 to 1,400 per dollar, allowing flexibility and a more realistic market alignment.

But why was an overvalued peso a bad thing? People want a strong currency, so why devalue? In Argentina’s case, a strong peso was not helping what Milei was trying to do. His goal was to get inflation under control and introduce dollars into the economy.

An overvalued currency hurts exports, encourages imports, and bleeds central-bank reserves of foreign currency like dollars. That meant there were not enough dollars in the country to dollarize at all, and artificially cheap imported goods fuelled further inflation. So Milei’s argument was to “rip the band-aid off now” and get the peso to its real market rate.

Opening the Door to the Dollar

Milei allowed dollars and pesos to circulate freely as legal tender, letting them compete in the market, and introduced tools to facilitate dollar transactions like dual-currency credit cards. By removing other currency controls, the black market for dollars that had previously flourished shrank dramatically, allowing the economy to formally use those dollars. And in May 2025, Milei rolled out a total tax amnesty on all dollars in the country.

This allowed people to use dollars for any purchase without having to declare where they came from to the tax authorities. In theory, this was set to add $270 billion of liquidity into the formal economy.

Taken together, it was a drastic package: massive spending cuts, a devalued currency, a shrunken government, and the door thrown open to the US dollar and the free market at large. Sink or swim — it was, in every sense, a deeply libertarian experiment.

The Good: A Surplus and Tamed Inflation

So has it worked? The outcomes of Milei’s reforms are numerous, as you would expect from someone who took a chainsaw — figuratively and literally — to the established way of doing things. It is complicated, with real wins and real teething problems.

The two biggest wins concern the budget deficit and inflation. Milei inherited a budget deficit of 5 percent of GDP — high, given the average across 164 countries in 2022 was -2.5 percent. Argentina was trillions of pesos in the red. Yet by the end of 2024, his administration had recorded a government surplus of 1.8 percent of GDP, or 0.3 percent accounting for debt payments.

That is genuinely astonishing to achieve in just over a year. Argentina has had a budget surplus in only 13 of its 123 years of history. If that surplus can be sustained, it could help stabilise the economy and secure investment in the country’s major industries.

Inflation was the second great win. Milei’s moves to devalue the peso, introduce US dollars, and align the currency with market exchange rates drastically reduced it. The Consumer Price Index — which tracks how the average cost of everyday goods and services changes over time, and is one of the main ways economists measure inflation — tells the story. In April 2024, CPI in Argentina was up 289 percent year on year.

By June 2025, it registered at 39.4 percent. The monthly inflation rate also fell from 52 percent in the first quarter of 2024 to 1.5 percent in May 2025. For a country that had been staring down another hyperinflation spiral, that is being called an economic “miracle.”

A Step in the Right Direction for the Vulnerable

There have also been some notable effects on Argentinian society’s most vulnerable. UNICEF noted in July 2025 that child poverty in Argentina had fallen by 14 percent, lifting an estimated 1.7 million children out of poverty. It is important to keep that figure in context: the percentage of children living in income-based poverty in early 2024 was as high as 67 percent after Milei’s original cuts, affecting more than eight million children. A 14 percent decrease in that context is good, but still leaves over half of children struggling, and there is no way to know how many were originally pushed into poverty by the reforms themselves.

Still, the decrease shows a step in the right direction. Things are better than they were, which suggests the plan could be working. Milei plans to encourage further foreign investment, economic liberalisation, and the privatisation of strategic state assets like the national oil company and state media. These are significant achievements that deserve credit.

Nobody was sure whether Milei could actually govern when he first ascended to the presidency, and few could have realistically expected him to make such a meaningful and positive difference to the nation’s pocketbook in such a short time.

The Bad: Recession, Poverty, and Insecure Jobs

But there are downsides, some short-term and some long-term, and it will be up to everyday Argentinians to decide whether the trade-off is worth it. Not all is rosy financially. Argentina’s national statistics institute reported that in the second half of 2024 the economy shrank in total terms by 1.7 percent. That is not a disaster given the scale of the changes, but it made life harder in an already stagnant economy.

Poverty levels remain very high, even after falling from their worst point in 2024. The downside of devaluing the currency so sharply was that there simply were not enough dollars in the country to replace the pesos — hence the 2025 tax amnesty. People’s money was devaluing fast, and with other prices staying reasonably consistent, many Argentinians were suddenly fighting just to stay afloat.

In January 2024, Argentina’s poverty rate reached a staggering 57.4 percent — slightly worse than a coin flip as to whether citizens could afford everyday amenities. That level has since fallen as inflation eased, but the floating band between 1,000 and 1,400 pesos per dollar means it remains subject to hefty fluctuations, leaving livelihoods uncertain. With gas prices doubled, food costs up 50 percent, and jobs insecure, the conditions are a recipe for resentment.

In late 2024, 69 percent of Argentinians polled said it was a bad time to look for a job — small wonder, with laid-off government workers flooding the market. At the same time, 35 percent reported not having enough money for food. In the libertarian society Milei seems intent on building, it is sink or swim, and some people are undoubtedly sinking. It is worth noting, however, that these figures are actually a little lower than they were in 2019, long before Milei took office.

Risks, Reserves, and the Trump Question

Argentina also slipped back into a budget deficit of $5.9 billion in the first quarter of 2025, so it remains to be seen whether the economic miracle was short-lived. Milei still has not fully dollarized the economy as he wanted, because of the lack of dollars in the country — and even that is not an ironclad policy. The country’s reserves are low, there are concerns about money laundering, and dollarization ostensibly ties the Argentinian economy to one of the most volatile US administrations in memory.

Trump’s policies are known to play havoc in global markets. Tying Argentina to the dollar would strip its own politicians of the ability to steer how the country reacts — and what happens if Milei and Trump fall out? For all the stability dollarization is supposed to bring, it looks risky.

There is also a question of whether Milei’s policies match his rhetoric. He rails against a so-called “caste” of politicians, bankers, elites, and leftists he blames for the country’s troubles. Yet opinion polls show that 59 percent of the richest 20 percent of society approve of Milei and his policies — the very people who include that same caste of wealthy elites.

Conversely, only 39 percent of the poorest 20 percent approve. Both numbers are higher than they were for the previous president, but it makes Milei’s talk of a caste system ring a little hollow when his policies are directly benefiting those he claims to hate more than the poorest in society.

The Ugly: Decrees, Vetoes, and Democratic Anxiety

Some remain worried about Milei’s propensity to lean on anti-democratic means to get his policies passed. He has used presidential decrees to bypass gridlock in a hostile Congress, and has vetoed laws it tried to pass to increase spending on things like disability welfare and pensions. This has sparked a public debate in Argentina about democratic norms and institutional checks and balances. This was a country under dictatorship less than half a century ago; authoritarian rule is still fresh in the minds of people’s parents and grandparents.

In March 2023, former president Alberto Fernández spoke out against Milei, calling him “a threat to democracy” in an interview with local media. He even invoked history: “Hitler did not come to power through a coup, he was voted for by the Germans. What we have to do is warn people that, however discouraged they may be, these are not healthy paths for the country.” Whether out of genuine concern or political calculation, it did not land.

Milei pushed back vehemently online: “We Argentines are fed up with politicians because for a hundred years they promoted a model that impoverishes citizens and enriches you. They destroyed one of the richest countries in the world with nefarious ideas to line their pockets.”

Yet there is some credence to the idea that Milei leans more autocratic. His vice president, Victoria Villarruel, is as divisive a figure as Milei himself, with deep ties to figures from Argentina’s military dictatorship; she previously visited the former dictator Rafael Videla in prison before his death. Many worry this vindicates a dark chapter in the country’s history. Does that mean a coup is imminent, turning Argentina into a libertarian dictatorship?

No. But it is something to consider amid a broader democratic slide across the world. As much as Milei is a proponent of Western values, perhaps one day we will see whether democracy is among them.

Eureka Moment or Cautionary Tale?

So where does that leave Argentina — on the path to total destruction or complete economic salvation? The answer is probably somewhere in the middle. Right now, it may be too soon to tell whether Milei’s policies will lead Argentina to a new economic golden age. What he has achieved so far is extremely significant given the situation the country was in before his election. The short-term pain he called unavoidable came, and is arguably on its way out, but will a long-term gain follow?

Optimism in the country is high. There have been some protests, such as in 2024, but far fewer than might have been expected given Argentina’s long history of strong labour unions. Milei’s supporters claim a long-term vision for the country, an end to populist dysfunction and a bipartisan system that was not working, arguing that the country finally has a chance to foster real growth after a decade and a half of stagnation.

His detractors cite increased poverty, wage stagnation, and the erosion of the social safety net. According to the Argentine edition of the Spanish daily El País, Milei supports the sale of human organs on the open market like any other commodity, and there are concerns he may be more interested in courting Washington than serving his own people.

There is still a long way to go in this chapter of Argentinian history. It may be remembered as a visionary eureka moment, or end up as a cautionary tale. What can be said for sure is that Argentina is unlikely to ever be the same again — and this may be just the tip of the spear. Or should we say, the tip of the chainsaw?

Presented by

Simon Whistler

Simon Whistler is one of YouTube's most prolific educational creators. HomeFronts is his deep dive into geopolitics, modern conflict, military history, and the civilian and societal dimensions of global events.

Frequently Asked Questions

Who is Javier Milei and what is his background? Javier Milei is an Argentine economist who became president on 10 December 2023. Before entering politics, he spent decades as an economics professor at universities including the University of Belgrano, the University of Buenos Aires, and the Argentine University of Enterprise, writing more than 50 academic papers by 2016. He worked as a senior economist for HSBC Argentina, with the international chamber of commerce, and led the economic studies division at the think tank Fundación Acordar before moving into media and then politics. He describes himself as an anarcho-capitalist.

What is “shock therapy” and what did it involve? Shock therapy refers to rapid, sweeping economic reform intended to restore investor confidence and balance the budget quickly. Milei’s version eliminated energy and transport subsidies, cut around 48,000 public-sector jobs, folded or slashed numerous ministries, froze infrastructure spending, reduced pensions and welfare, and devalued the peso. He warned in his inaugural speech that “there is no alternative to a shock adjustment” and “there is no money.”

How much did inflation actually fall under Milei? The reduction was dramatic. Year-on-year inflation, measured by the Consumer Price Index, stood at 289 percent in April 2024 and fell to 39.4 percent by June 2025. Monthly inflation dropped from 52 percent in the first quarter of 2024 to just 1.5 percent in May 2025. Combined with a budget surplus, this turnaround has been described as an economic miracle for a country that had been facing another hyperinflation spiral.

Did Milei dollarize Argentina’s economy? Not fully. Although dollarization — replacing the peso with the US dollar — was a central campaign promise, Argentina lacked enough dollars in the country to do it outright. Instead, Milei allowed dollars and pesos to circulate freely as legal tender, introduced dual-currency credit cards, removed currency controls that shrank the dollar black market, and in May 2025 rolled out a total tax amnesty on dollars, projected to add $270 billion in liquidity to the formal economy.

What was the human cost of the reforms? The cuts hit ordinary people hard. Poverty reached 57.4 percent in January 2024, the metro price spiked 360 percent overnight, food costs rose 50 percent, and gas prices doubled. Infrastructure spending fell 74 percent, education 52 percent, social development 60 percent, and healthcare 28 percent. In late 2024, 69 percent of those polled said it was a bad time to find work, and 35 percent reported not having enough money for food — though some of these figures were lower than in 2019.

Did the reforms help the poorest Argentinians at all? There are signs of improvement. UNICEF reported in July 2025 that child poverty had fallen 14 percent, lifting an estimated 1.7 million children out of poverty. However, child poverty had been as high as 67 percent in early 2024 after the initial cuts, so more than half of children were still struggling. The overall poverty rate also fell as inflation eased, though the floating exchange band leaves livelihoods exposed to fluctuation.

Why are there concerns about democracy under Milei? Milei has used presidential decrees to bypass a hostile Congress and vetoed laws aimed at increasing spending on disability welfare and pensions, prompting debate about institutional checks and balances. His vice president, Victoria Villarruel, has ties to figures from Argentina’s military dictatorship and visited former dictator Rafael Videla in prison. With authoritarian rule still in living memory for many families, critics worry about a broader democratic slide, even though there is no imminent threat of a coup.