TGIF: Milei at Davos

\Javier Milei, the newly elected president of Argentina, spoke the other day at the annual meeting of the World Economic Forum in Davos, Switzerland. The WEF is essentially a group of people who want world affairs centrally planned by political authorities. They are hardly advocates of laissez-faire free enterprise and individual liberty. Milei, on the other hand, is. He describes himself as a libertarian, an unabashed advocate of the free market, and even a Rothbardian anarcho-capitalist. Milei's speech has to be unlike any speech given at a WEF meeting. It would shine bright even if today's political landscape were not as bleak as it is. As a public service, I present it below. (You can watch here.)

Good afternoon, thank you very much: today I am here to tell you that The West is in danger, it is in danger because those, who are supposed to defend the values of the West, find themselves co-opted by a vision of the world which – inexorably – leads to socialism, consequently to poverty.

Unfortunately, in recent decades, motivated by some right-thinking desires to help others and others by the desire to belong to a privileged caste, the main leaders of the Western world have abandoned the model of freedom, for different versions of what we call collectivism.

We are here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world, but – on the contrary – they are their cause. Believe me, there is no one better than us Argentinians to testify to these two issues.

When we adopted the model of freedom – back in 1860 – in 35 years we became the first world power, while when we embraced collectivism, over the last 100 years, we saw how Our citizens began to systematically become poorer, falling to 140th place in the world. But before we can give this discussion, it will be important that – first – we see the data that supports why free enterprise capitalism is not only a possible system to end poverty, in the world, but it is the only system – morally desirable – to achieve it.

If we consider the history of economic progress we can see how from year zero to approximately the year 1800, the world's GDP per capita practically remained constant throughout the reference period. If one looks at a graph of the evolution of economic growth, throughout the history of humanity, one would be seeing a graph with the shape of a hockey stick, an exponential function, which remained constant, for 90 percent of the time, and shoots up exponentially starting in the 19th century. The only exception to this history of stagnation occurred at the end of the 15th century, with the discovery of America. But apart from this exception, throughout the entire period, between the year zero and the year 1800, GDP per capita, at a global level, remained stagnant.

Now, not only does capitalism generate an explosion of wealth, from the moment it was adopted as an economic system, but if one analyzes the data what is observed is that growth has been accelerating, throughout the entire period.

Throughout the entire period – from year zero to 1800 – the growth rate of GDP per capita remained stable at around 0.02 percent annually. That is, practically no growth; Starting in the 19th century with the Industrial Revolution, the growth rate increased to 0.66 percent. At that rate, to double GDP per capita, it would need to grow for 107 years.

Now, if we look at the period between 1900 and 1950, the growth rate accelerates to 1.66 percent annually. We no longer need 107 years to double GDP per capita, but 66. And if we take the period – between 1950 and 2000 – we see that the growth rate was 2.1 percent annually, which would result in just 33 years we could double the world's GDP per capita. This trend, far from stopping, remains alive, even today. If we take the period, between 2000 and 2023, the growth rate accelerated again to 3 percent annually, which implies that We could double our GDP per capita in the world in just 23 years.

Now, when the GDP per capita is studied, from the year 1800 to today, what is observed is that, after the Industrial Revolution, the world's GDP per capita multiplied by more than 15 times, generating an explosion of wealth that lifted 90 percent of the world's population out of poverty.

We must never forget that by the year 1800, about 95 percent of the world's population lived in the most extreme poverty; while that number fell to 5 percent by 2020, prior to the pandemic.

The conclusion is obvious: far from being the cause of our problems, free enterprise capitalism, as an economic system, is the only tool we have to end hunger, poverty and homelessness, throughout the entire planet. The empirical evidence is unquestionable.

Therefore, as there is no doubt that free market capitalism is superior – in productive terms – the leftist doxa has attacked capitalism for its questions of morality, for being – according to them – their detractors, which is unfair.

They say that capitalism is bad because it is individualistic and that collectivism is good because it is altruistic, with others. Consequently they fight for social justice, but this concept that – since the First World – has been fashionable, in recent times, in my country it is a constant of political discourse, for more than 80 years. The problem is that social justice is not fair, but it also does not contribute to the general well-being; Quite the contrary, it is an intrinsically unjust idea because it is violent; It is unfair because the State is financed through taxes and taxes are collected coercively. Can any of us say that we pay taxes voluntarily? Which means that the State is financed through coercion and the greater the tax burden, the greater the coercion, the less freedom.

Those who promote social justice start from the idea that the entire economy is a cake that can be distributed in a different way, but that cake is not given, it is wealth that is generated, in what – for example – Israel Kirzner calls a market discovery process. If the good or service that a company offers is not desired, that company goes bankrupt unless it adapts to what the market is demanding. If it generates a good quality product at a good, attractive price, it will do well and it will produce more.

So the market is a process of discovery, in which the capitalist finds the right direction along the way, but if the State punishes the capitalist for being successful and blocks him in this discovery process, it destroys his incentives and the consequences of that are that it will produce less and the cake will be smaller, generating harm to society as a whole.

Collectivism, by inhibiting these discovery processes and making the appropriation of what is discovered difficult, ties the entrepreneur's hands and makes it impossible for him to produce better goods and offer better services at a better price. How can it be, then, that academia, international organizations, politics and economic theory demonize an economic system that has not only lifted 90 percent of the world's population out of the most extreme poverty ... and does it faster and faster, but is also fair and morally superior?

Thanks to free enterprise capitalism, today, the world is at its best. There has never been, in the entire history of humanity, a time of greater prosperity than the one we live in today. The world today is freer, richer, more peaceful and more prosperous, than any other time in our history. This is true for everyone, but particularly for those countries that are free, where they respect economic freedom and property rights of individuals. Because those countries that are free are 12 times richer than the repressed ones. The lowest decile of the distribution of free countries lives better than 90 percent of the population of repressed countries, [and poverty is 25 times lower, and extreme poverty is 50 times lower]. And if that were not enough, citizens of free countries live 25 percent longer than citizens of repressed countries.

Now, to understand what we come to defend it is important to define what we are talking about when we talk about libertarianism. To define it, I return to the words of the greatest hero of the ideas of freedom, from Argentina, Professor Alberto Benegas Lynch Jr. who says: “libertarianism is the unrestricted respect for the life project of others, based on the principle of non-aggression, in defense of the right to life, liberty and property, whose fundamental institutions are private property, markets free of state intervention, free competition, division of labor and social cooperation [in which success is achieved only by serving others with goods of better quality or at a better price].”

In other words, the capitalist is a social benefactor who, far from appropriating other people's wealth, contributes to the general well-being. Ultimately, a successful businessman is a hero.

This is the model that we are proposing for the Argentina of the future. A model based on the fundamental principles of libertarianism: the defense of life, liberty and property.

Now, if free enterprise capitalism and economic freedom have been extraordinary tools to end poverty in the world; and we find ourselves today in the best moment in the history of humanity, why do I say then that the West is in danger?

I say that the West is in danger precisely because in those countries that should defend the values of the free market, private property, and the other institutions of libertarianism, sectors of the political and economic establishment, some, due to errors in their theoretical framework and others due to ambition for power, are undermining the foundations of libertarianism, opening the doors to socialism and potentially condemning us to poverty, misery and stagnation.

Because it should never be forgotten that socialism is always and everywhere an impoverishing phenomenon that failed in all the countries it was attempted. It was an economic failure. It was a failure socially. It was a cultural failure. And he also murdered more than 100 million human beings.

The essential problem of the West today is that we not only must confront those who, even after the fall of the wall and the overwhelming empirical evidence, continue to fight for impoverishing socialism; but also to our own leaders, thinkers and academics who, protected by a wrong theoretical framework, undermine the foundations of the system that has given us the greatest expansion of wealth and prosperity in our history.

The theoretical framework to which I am referring is that of neoclassical economic theory, which designs an instrument that, unintentionally, ends up being functional to the interference of the state, socialism, and the degradation of society. The problem with neoclassicals is that since the model they fell in love with does not map against reality, they attribute the error to supposed market failures instead of reviewing the premises of their model.

Under the pretext of an alleged market failure, regulations are introduced that only generate distortions in the price system, which impede economic calculation, and consequently savings, investment and growth.

This problem essentially lies in the fact that not even supposedly libertarian economists understand what the market is, since if it were understood it would quickly be seen that it is impossible for something like market failures to exist.

The market is not a supply and demand curve on a graph. The market is a mechanism of social cooperation where people exchange voluntarily. Therefore, given that definition, market failure is an oxymoron. There is no market failure.

If transactions are voluntary, the only context in which there can be a market failure is if there is coercion. And the only one with the capacity to coerce in a generalized way is the state that has a monopoly on violence. Consequently, if someone considers that there is a market failure, I would recommend that they check if there is state intervention in the medium. And if they find that there is no state intervention in the medium, I suggest that they do it again, the analysis, because it is definitely wrong. Market failures do not exist.

An example of the supposed market failures that neoclassicals describe are the concentrated structures of the economy. However, without functions that present increasing returns to scale, whose counterparts are the concentrated structures of the economy, we would not be able to explain economic growth from the year 1800 to today.

Look how interesting. From the year 1800 onwards, with the population multiplying more than 8 or 9 times, the per capita product grew more than 15 times. There are increasing returns, that brought extreme poverty from 95% to 5%. However, this presence of increasing returns implies concentrated structures, what would be called a monopoly.

How can it be that something that has generated so much well-being for the neoclassical theorist is a market failure? Neoclassical economists, get out of the box. When the model fails, you don't have to get angry with reality, you have to get angry with the model and change it.

The dilemma faced by the neo-classical model is that they say they want to perfect the functioning of the market by attacking what they consider failures, but by doing so they not only open the doors to socialism, but also threaten economic growth.

For example, regulating monopolies, destroying their profits, and destroying increasing returns would automatically destroy economic growth.

In other words, every time you want to correct a supposed market failure, inexorably, because you don't know what the market is or because you have fallen in love with a failed model, you are opening the doors to socialism and are condemning people to poverty.

However, in the face of the theoretical demonstration that state intervention is harmful, and the empirical evidence that it failed - because it could not be otherwise - the solution that the collectivists will propose does not It is not more freedom but it is more regulation, generating a downward spiral of regulations until we are all poorer and the lives of all of us depend on a bureaucrat sitting in a luxury office.

Given the resounding failure of collectivist models and the undeniable advances of the free world, socialists were forced to change their agenda. They left behind the class struggle based on the economic system to replace it with other supposed social conflicts that are equally harmful to community life and economic growth.

The first of these new battles was the ridiculous and unnatural fight between man and woman.

Libertarianism already establishes equality between the sexes. The foundation stone of our creed says that all men are created equal, that we all have the same inalienable rights granted by the creator, among which are life, liberty and property.

The only thing that this agenda of radical feminism has become is greater intervention by the state to hinder the economic process, giving work to bureaucrats who do not contribute anything to society, be it in the format of women's ministries or international organizations dedicated to promoting this agenda.

Another conflict that socialists raise is that of man against nature. They maintain that human beings damage the planet and that it must be protected at all costs, even going so far as to advocate for population control mechanisms or in the bloody agenda of abortion.

Unfortunately, these harmful ideas have strongly permeated our society. Neo-Marxists have known how to co-opt the common sense of the West. They achieved this thanks to the appropriation of the media, culture, universities, and yes, also international organizations.

Luckily, there are more and more of us who dare to raise our voices. Because we see that, if we do not fight these ideas head-on, the only possible destiny is that we will increasingly have more state, more regulation, more socialism, more poverty, less freedom, and, consequently, a worse standard of living.

The West, unfortunately, has already begun to go down this path. I know that to many it may sound ridiculous to propose that the West has turned to socialism. But it is only ridiculous to the extent that one restricts oneself to the traditional economic definition of socialism, which establishes that it is an economic system where the state is the owner of the means of production.

This definition should be, for us, updated to present circumstances. Today states do not need to directly control the means of production to control every aspect of individuals' lives.

With tools such as monetary creation, debt, subsidies, interest rate control, price controls and regulations to correct supposed “market failures”, they can control the destinies of millions of human beings.

This is how we get to the point where, with different names or forms, a good part of the political offers generally accepted in most Western countries are collectivist variants.

Whether they openly declare themselves communists, fascists, nazis, socialists, social democrats, national socialists, Christian democrats, neo-Keynesians, progressives, populists, nationalists or globalists.

Deep down there are no substantive differences: they all maintain that the state must direct all aspects of individuals' lives. They all defend a model contrary to the one that led humanity to the most spectacular progress in its history.

We come here today to invite other Western countries to return to the path of prosperity. Economic freedom, limited government and unrestricted respect for private property are essential elements for economic growth.

This phenomenon of impoverishment that collectivism produces is not a fantasy. Nor is fatalism. It is a reality that we Argentines know very well.

Because we already lived it. We've already been through this. Because as I said before, since we decided to abandon the model of freedom that had made us rich, we are trapped in a downward spiral where we are poorer every day.

We already lived it. And we are here to warn you about what can happen if the Western countries that became rich with the model of freedom continue on this path of servitude.

The Argentine case is the empirical demonstration that it does not matter how rich you are, how many natural resources you have, it does not matter how trained the population is, nor how educated it is, nor how many gold bars there are in the coffers of the central bank.

If measures are adopted that hinder the free functioning of markets, free competition, free pricing systems, if trade is hindered, if private property is attacked, the only destiny possible is poverty.

Finally, I want to leave a message to all the businessmen present here and to those who are watching us from all corners of the planet.

Do not let yourselves be intimidated by the political caste or by the parasites who live off the state. Do not surrender to a political class that only wants to remain in power and maintain its privileges.

You are social benefactors. You are heroes. You are the creators of the most extraordinary period of prosperity we have ever experienced. Let no one tell you that your ambition is immoral. If you make money it is because you offer a better product at a better price, thus contributing to general well-being.

Do not give in to the advance of the state. The state is not the solution. The state is the problem itself.

You are the true protagonists of this story, and know that starting today, you have an unwavering ally in the Argentine Republic.

Thank you very much and long live freedom, [dammit].