Philipp Bagus is a professor at the Rey Juan Carlos University in Madrid, where he teaches introductory economics, microeconomics, macroeconomics, and Austrian school methodology. He is a member of the Mises Institute, an International Review of Economics & Finance (IREF) scholar, and author of numerous books, including In Defence of Deflation and Tragedy of the Euro, which has been translated into eleven languages.
Many in the media refer to you as Javier Milei’s chief economist because the Argentine president recommended your book In Defence of Deflation.
Yes, he recommended it and he likes it a lot. It was my doctoral thesis, in which I explain the different types of deflation. It has a lot of practical relevance because inflationary measures are often justified by the fear of deflation, which is apparently something terrible. So the white knight, the central bank, starts printing money to save humanity. Fortunately, Javier Milei has read and understood the book and shares my thesis.
What is your assessment of Javier Milei’s economic policy?
Milei’s first year in office was a great success. Argentina was on the verge of collapse as price inflation was accelerating, on its way to hyperinflation. There was a 5% deficit in the treasury and a 10% deficit in the central bank, which had indebted the country since that debt had been paid by printing new money. Argentina already had a bad reputation and the most likely outcome was a descent into hyperinflation, which would have plunged the country into misery with very high poverty rates that would have caused much suffering. Milei, without a majority in parliament, was able to avoid that hyperinflation. How did he do it? From the first month, he had a budget surplus and reduced public spending by 25%, that is, he reduced the government by a quarter.
There is no comparison in history with what Milei did to shrink the government so quickly, at least in peacetime. It was not easy at all, but, and this is very important, he did it without becoming unpopular. Many politicians are afraid to cut public spending because they think they will become unpopular and lose the elections. But Milei has reduced the size of the government by a quarter without losing his popularity, which is extraordinary.
He has also carried out deregulation and started privatization, and at the same time, he is fighting a cultural battle on a global level, with global effects. You only had to see the presidential inauguration ceremony in the United States. Donald Trump, Elon Musk, and Vivek Ramaswamy are inspired by what Milei is doing in Argentina.
Milei has likened these cuts to a chainsaw, putting an end to a completely unviable model.
Yes, Argentina was one of the richest countries in the world, and in a hundred years it has been reduced to misery because of this socialist and statist system, full of nepotism and corruption.
Is the Milei model exportable, or is it a phenomenon that can only occur in Argentina due to its specific characteristics?
There are universal economic laws that work all over the world. If you reduce the size of the government, you leave space for the private economy to grow. This is universal, and if you reduce the government in Spain by 25%, the exact same thing would happen—there would be 25% more space for the private economy to grow, innovate, and achieve very high growth rates. Argentina had, and still has, the same problems as Western countries: overspending, inflation, public deficit, very high debt, an unsustainable pension system, and overregulation. All countries have these problems, but in Argentina, they were much more pronounced, so if these libertarian prescriptions work in Argentina, then of course they will work in Europe or the United States.
The question is whether there is the political will to do it.
Argentina had the advantage, so to speak, that it had already hit rock bottom, it was at the edge of the abyss, and people did not know what to do because the old policies did not fix anything. With Milei, they dared to try something different. But in Europe, there is not the same situation of misery. Germany, for example, is in free fall, but the people are still living quite well, they have not reached poverty like in Argentina and they do not dare to try something different like what Milei did.
You mentioned the cultural battle. How important has this been in making Argentinians understand the need for these economic reforms?
Milei fought the cultural battle for ten years on television, radio, and in the media, and it was only thanks to this that he came to power, because people understood what he wanted to do. When he became president he said: “There is no money,” and people applauded him. He did the opposite of what another politician would have done. Instead of promising impossible things, he told the truth: “There is no money.” And they applauded him thanks to the cultural battle that facilitated a change of mentality; a change that happened because he explained over and over again what he was going to do and why he had to do it, and people understood it. He has also quoted the authors [he relies on], so anyone who wants to go deeper into the ideas of freedom can do so. Milei has shown the importance of the cultural battle and we can learn a lot from him.
Do you think Milei’s party, La Libertad Avanza, will significantly increase its representation in the legislative elections in October?
I hope so. Milei maintained his popularity throughout the recession, which will likely end in April/May. Now there is clear economic growth, macroeconomic stability, inflation is under control, the poverty rate is falling, real wages are growing, etc. If the economy continues to grow and Milei maintains his popularity, I have no doubt that he will win the October elections. In that case, the parliamentary majority will allow him to do things he cannot do by decree, such as, for example, labour reform to end unemployment.
Together with Professor Michael Esfeld, you have promoted a “Declaration of the West”, which is supported by personalities such as Javier Milei and Jordan Peterson. What is this declaration?
The “Declaration of the West” seeks to defend the values that have made the West great. Europe was the first continent to abandon mass poverty and achieved the greatest technological advances thanks to science and rationality. A continent based on the values of Christianity, where every human being is unique and has unlimited value.
But these values are endangered by progressivism and wokism, which have attacked the West by presenting envy and resentment as social justice, and have pitted society against itself: men against women, blacks against whites, heterosexuals against homosexuals, and so on. Progressivism has presented the state as the sole guarantor of ending these injustices and divisions, and it seeks to destroy our Western civilisation.
This declaration aims to defend our civilisation and is supported by Javier Milei, former Czech president Vaclav Klaus, and the Canadian conservative Jordan Peterson, which shows that it is possible to build alliances to end this destruction.
With the arrival of Trump in the White House, it seems evident that there is a change of course. However, do you think that countries like Germany or Spain have to hit rock bottom, like Argentina did, for this reaction to take place?
I hope we don’t have to hit rock bottom. There is hope because Javier Milei has shown how the cultural battle can be won and Argentina is now an example. The lefties are trembling because if Javier Milei, against all odds, becomes an example for the whole world, we can reverse all socialist policies. It is happening in other countries, like in the United States, and more and more people want to come closer to the ideas of freedom, to Javier Milei, and his Argentinian miracle.
