Argentina’s economic turnaround has left Keynesians frustrated and free-marketeers vindicated. But the real lesson for SA is that a slow sinking ship can be turned around.
Rather than asking whether President Javier Milei’s shock therapy could “work” in SA — which invites all the usual ideological scuffles — I argue that Argentina’s sudden recovery challenges the fatalism many South Africans have internalised about state reform, governance failure and economic stagnation. I don’t argue that SA necessarily needs its own Milei (though I would not be sad to see one), but rather that we need to stop thinking that this ship will undoubtedly sink.
For all its eccentricity, Milei’s libertarian project proves that a democratic government can reverse decades of decline, and do so quickly, dramatically and without abandoning constitutional norms. That stands in stark contrast to SA’s political national mood, in which real reform is endlessly chased but seldom achieved. Argentina also had entrenched labour unions, populist legacy parties and a bloated welfare state. The difference wasn’t the institutions. It was the will, and the electoral mandate Milei was given.
It turns out that governments can, in fact, change course; that a country deep in crisis doesn’t need a technocrat or a tyrant to impose order. It just needs someone willing to act as if the crisis is real. By contrast, SA politics treats crisis as an ever-present background condition unchangeably with us due to our country’s history.
Policy papers are endlessly written and a litany of task teams are assembled. Yet on a national level we do not reform. SA policymaking is stuck in a Groundhog Day, where our politicians wake up occasionally, reannounce the same reforms and act surprised when nothing changes.
This was the case for a long time in Argentina too. Two years ago, it looked like a country doomed. Inflation above 200%. Half the population in poverty. A currency spiralling into worthlessness. And then, out of this wreckage voters elected Milei, a wild-eyed libertarian economist who campaigned with a literal chainsaw and a promise to slash the state down to its roots.
The establishment laughed at his libertarian proposals and some braced for the “inevitable” collapse he would supposedly cause. But the collapse didn’t come. Remarkably, what came instead was recovery. Inflation fell. Growth returned. Investors, once skittish, piled back in. Rent prices dropped in real terms.
The public deficit, for decades an immovable fixture of Argentine life (South Africans are quite used to these types of structural failures being treated as permanent facts of life such as rolling blackouts or failing service delivery) was erased in a matter of months. And all of this was done through policies the average SA policy wonk would dismiss as reckless, politically naive or “unrealistic”.
This isn’t an argument for importing Milei’s programme wholesale. SA isn’t Argentina and our problems, though similar in type, have different historical roots and social dynamics. But the Argentina experience should make it clear that our slow-motion crisis isn’t inevitable. It’s a political choice.
Myth of the unreformable state
A peculiar fatalism has taken hold in SA, especially among the professional class. Many assume real reform is simply beyond reach, too politically costly or socially disruptive to attempt. So they emigrate to Europe, the US or their security estate. This is not to blame them — SA’s challenges often seem insurmountable.
But Argentina was also written off as unreformable. Decades of Peronist patronage had created a bloated public sector, subsidised everything from electricity to football tickets, and convinced much of the population that markets were exploitive by default. Their unions were powerful and their political culture was allergic to austerity. Sound familiar?
South Africans need to admit its current model has failed, vote out the statists who built it, stop replacing them with parties offering more of the same, and get on with it.
And yet, in the face of that Milei’s government cut spending by more than 30%, fired tens of thousands of public employees and shut down entire ministries. Rent control laws were scrapped. The money printer was unplugged. And after some initial pain, including higher food prices and higher unemployment in state-linked sectors, the results began to show. By the middle of this year inflation had drastically dropped, growth had rebounded and even poverty began to fall.
How did this happen? The answer is both mundane and revolutionary: they did the thing. They stopped pretending there was another way. Argentina’s crisis was real and their response matched its scale.
What has been striking about Milei’s approach is not just its economic effect. It’s that it has been achieved (so far) without violating democratic norms. He hasn’t suspended elections or silenced opposition parties. His reforms, though aggressive, have mostly been pursued through the legislature or via lawful presidential decree. In fact, his coalition is a fragile one and much of his agenda has required negotiation and compromise.
This is not the profile of a strongman, as we’ve seen with the populist revolution we’re seeing over the globe. It does seem that Milei takes democracy as seriously as he does his free market convictions. Compare that to SA, where major reforms — from labour deregulation to education overhaul — have been promised but postponed indefinitely due to their clinging to failed ideology.
You don’t have to romanticise Milei, and we don’t need the same kind of theatrical libertarianism. But we do need politicians who are doers of deeds (to borrow from Franklin D Roosevelt’s famous speech) and not the critic who refuses to accept that SA’s project with centralisation, redistribution and state-led development has failed.
For years Argentina was the go-to cautionary tale for what happens when states lose their fiscal discipline. It’s where commentators and analysts pointed when someone warned about Eskom or the public wage bill. Now, suddenly, it’s a case study in how fast things can turn around if a government is willing to act and admit that there is actually an emergency.
SA, by contrast, remains stuck. We have rituals of accountability rather than accountability itself. We see the performance of reform rather than actual reform. We debate inequality in abstract terms while 60% of young people sit unemployed. We bemoan poor service delivery, but never honestly touch the underlying centralised and state-led structure that produces it. Even now the most radical proposals on the table are from the same ideological tent that caused the problems in the first place.
The irony is that SA still has more institutional capacity than Argentina did when Milei took office. Our courts are stronger (despite challenges and jurisprudential dogma). Our civil society is more robust. We have functional banks, a relatively independent central bank and a constitution that still commands legitimacy. If anything, we are better positioned for serious reform than Argentina ever was.
Reform can still come. But first South Africans need to admit its model has failed, vote out the statists who built it, stop replacing them with parties offering more of the same, and get on with it.
• Eloff, a writer and nonprofit executive, is a legal adviser to the mayor of Cape Town. He writes in his personal capacity.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.