Why has President Milei not yet closed Argentina's central bank?
Can the libertarian lion fulfill his promise to bring down Goliath to its knees?
Javier Milei, the incumbent President of Argentina, is one of the most consequential and transformative political leaders of the twenty-first century. What truly sets him apart besides his eccentric personality, is the fact that he was elected as a libertarian. Why is it a big deal? Because libertarian ideals have been dismissed for too long.
Indeed, libertarians have been dismissed by the political class for being too quixotic rather than realistic, too normative rather than positive, and too theoretical rather than practical. As a result, libertarian ideals have been relegated to academic and intellectual milieux as the gatekeepers of the political elite have been actively preventing its proliferation into mainstream politics. Thus, Milei’s election in late 2023, marked a significant breakthrough for libertarianism into mainstream politics.
During his presidential campaign in 2023, Javier Milei presented himself, not just as a libertarian, but also as an anarcho-capitalist. A professional economist, he proclaimed to be a disciple of the Austrian School of Economics after reading the writings of Murray Rothbard, Hans-Hermann Hoppe, and Ludwig von Mises. His main agenda focused on radically cutting government spending by ruthlessly reducing its size in order to tame inflation and bring economic stability to the country. One of his core promises during the campaign trail in 2023 was to close Argentina’s central bank as he correctly claimed that it is the source of all the economic woes of Argentina. He even added that “shutting down the central bank is non-negotiable.”
Since he took power, he pretty much accomplished everything he said he was going to do—his economic policies drastically reduced inflation, his administration produced a surplus after decades of deficits and bureaucratic mismanagement, and capital influx began to grow again—except one major promise he had not yet delivered: the abolition of the Argentinian central bank.
On theoretical grounds, Javier Milei has been logically consistent with libertarian views on central banks. Libertarians believe that central banks are the root cause of all socioeconomic problems in modern society. With the power of printing money out of thin air, central banks have the ability to create inflation, manipulate interest rates as well as the quantity of money, and fund wars. Libertarians, especially the anarcho-capitalists, believe that abolishing the central bank is the only practical solution to bring true economic stability and prosperity in a truly free society. On practical grounds, however, President Milei has not delivered on his promises. He had not even initiated the closing proceedings of Argentina’s central bank.
President Milei had not yet engaged in the closing proceedings of the central bank because it is a process that can only be done gradually as certain parameters must first be in place for the process to kick off. One of the first steps before starting the closing proceedings was to dollarize the Argentinian Peso since the central bank has negative net reserves. Indeed, the Argentinian Peso became a failed currency after losing the quasi-totality of its value due to excessive money printing and exorbitant price-control policies. Secondly, President Milei has to fix the monetary mismatch created by the Bank and end the monetization of its debt prior to starting the closing proceeding. The Central Bank of Argentina would be replaced with an independent agency that wouldn’t have the power to print money at will and monetize the fiscal debt.
Until these measures are put in place, it is realistically impossible for the libertarian lion to officially start the closing proceedings of the central bank. Lastly, in order for President Milei to successfully close the Bank, he will have to do so by decree rather than using the legislative process. Why? Because the Argentinian political class will do whatever it takes to prevent the closure of the central bank it is the unofficial bank of the Argentinian state. If the Bank closes, politicians will receive no funding to create programs or run the existing ones. Therefore, President Milei has a lot to do prior to starting the closing proceedings. But the closing of the Central Bank of Argentina is totally and realistically doable.