Argentinian President Mila announced the dismissal of over 5,000 government employees. How far along is the Argentinian economic reform decree, and is it currently effective?

(Observer Network News) According to reports from foreign media, on the 26th local time, the current President of Argentina, Mila, announced that he would not renew contracts with government employees hired before his inauguration in 2023. According to the new government’s estimate, more than 5,000 employees will be laid off. This decision quickly triggered a new round of protests against its economic reforms.Mila stated that this decree is part of his efforts to combat Argentina’s dire economic situation and rampant inflation. Reports indicate that Argentina’s inflation rate is expected to reach 200% by the end of the year. Mila believes that the Argentine economy, which is already in dire straits, can be changed through comprehensive government spending cuts and a currency devaluation plan.According to this decree, authorities will review the contracts of government employees hired before January 1, 2023, within the next 90 days. Analysts from the Associated Press believe that setting the January 1, 2023 deadline is aimed at addressing the practice of the previous president in the last year of raising government employee salaries.Furthermore, this round of layoffs does not target all government employees. According to relevant regulations, government employees in Argentina who have statutory quotas or are considered “indispensable” will be exempt from layoffs.According to estimates from the Argentine Civil Service Union, the number of national employees laid off in this round will exceed the government’s announced figures, and the final number of layoffs may exceed 7,000 people.It is expected that this change will have a certain impact on the finances of the Argentine national government. According to the latest data from the Argentine Ministry of Labor, there are nearly 3.5 million employees in the Argentine public sector, with the federal government employing 338,000, accounting for approximately one-tenth of the total. Argentine President Mila announced the layoffs of more than 5,000 government employees.

Understanding Shock Therapy: Public vs Economists

Public perception of shock therapy is fundamentally different from that of economists.

To the public, shock therapy is essentially starting over.

This is why, during the campaign, Miley’s proposal to cut nine government departments gained significant support. The reasons for the public’s support for starting over are simple:

  1. The socio-economic situation has already deteriorated so much, how much worse could it get? Starting over at least adds some possibilities.
  2. Most people no longer possess any assets; thus, starting over doesn’t harm them. On the contrary, they prefer to see the established, guaranteed job holders and the comprador bourgeoisie toppled. Whether it works or not, it’s satisfying to see.
  3. Another point, whether overlooked intentionally or genuinely unforeseen, is that people just want to be entertained. With nothing much to lose and life being harsh, they welcome any form of excitement. If someone claims they’ll perform a thrilling act, wouldn’t you be intrigued? If the act fails, it’s not on you, so why not enjoy the show?

Here’s another lesser-known fact: Hyperinflation and severe currency devaluation hit the middle class hardest. This group is the most vulnerable and least able to stir significant change. The top wealthy, with their assets primarily in tangible forms, are naturally insulated from inflation and currency devaluation. As long as they’re not in a rush to liquidate assets, their wealth increases with inflation. The very poor, on the other hand, are less affected because they spend what they earn quickly and aren’t holding money long enough to lose value. As long as jobs are available and basic necessities like food are accessible, the poor are less sensitive to inflation.

Thus, Miley’s subsequent reforms are bound to provoke continuous protests, mainly from the middle class, such as the recently laid-off civil servants. However, as long as the lowest stratum of society remains unreactive, Miley will not compromise and will continue the reforms. Even though the lower class also suffers, seeing the formerly slightly better-off middle class fall to their level actually garners support for the reforms.

Eventually, Miley’s reforms might lead to this scenario:

The lower class, though suffering, feels somewhat satisfied due to a perceived increase in fairness. The middle class, now impoverished, is dissatisfied but disunited and unable to make significant changes. The elite continue to exploit the masses, becoming the comprador bourgeoisie. The country’s core assets, such as land, minerals, and industry, are nearly all bought up by foreign interests. The entire nation becomes a labor force for the West, generationally working and waiting for the next revolutionary to emerge. When that time comes, the real starting over will occur. But who knows when or who that might be?

The Argentine Public’s Choice: A Call for Change

The reason Argentinians chose Miley was clear: they wanted to see the iron rice bowl holders laid off. The plan was to surpass 7000 layoffs, starting with 5000, with more expected to follow. With Argentina’s economy in dire straits and severe inflation, a minority holds a monopoly over many assets. The majority of the populace lives in poverty, and as life becomes increasingly harder with a growing wealth gap, there’s a strong desire to overturn the current system.

Miley tapped into this sentiment, promising reforms in this area.

Miley’s Reform Focus and Austerity Measures

Miley has advocated for reducing government subsidies while increasing related social aid, criticizing the subsidies for not providing practical help and exacerbating inflation. About 40% of the fiscal deficit comes from these subsidies, funded by currency issuance, leading to inflation.

Argentina declared an economic emergency in 11 provinces, reducing government departments from 18 to 9 and secretary positions from 106 to 54. The plan includes cutting subsidies for energy and transportation, halting new public works tenders, and canceling unfinished projects. This comprehensive austerity is an attempt to reduce government spending in various sectors.

The “Electric Saw Plan” indicates a future with no official advertising or funded foreign travel for officials, targeting resources managed by the lower house, especially advertisement and travel funded by the House of Representatives.

Following the announcement of peso devaluation measures, prices in Argentina soared. The government’s austerity aims to reduce the need for currency issuance and control inflation.

Economic Outlook and Critique of Miley’s Approach

While these measures might seem promising, the overall impact is likely minimal, with a high chance that Argentina’s economy will deteriorate further. Miley’s political maneuvers, including exploiting anti-China rhetoric for votes and other populist statements, have been criticized as typical of insincere politicians. The suspension of currency swaps with Argentina and various anti-intellectual statements highlight the challenges of his leadership.

The Necessity of Structural Change in Argentina

Without changing the domestic industrial structure and regaining control over core assets to stimulate employment and income, other changes are futile. Many of Argentina’s core resources are monopolized by a few, and much of its infrastructure, including railroads, dates back to colonial times for the convenience of transporting agricultural products and livestock, hardly reflecting a modern nation.

The majority of Argentinian enterprises were sold off around the year 2000, leading to widespread layoffs. The largest banks are largely foreign-owned, and the money earned from sales was quickly spent, leaving a considerable debt. As of the end of 2022, Argentina’s external debt was around $270 billion.

With a poverty rate exceeding 37%, and a growing number of middle-class individuals falling back into poverty, Miley plans to sell off all remaining state enterprises to foreign interests. This would result in monopolies over core assets by private entities and a wider wealth gap, leaving little hope for the average Argentine.

The issues facing Argentina are complex, and without in-depth reform, the situation is unlikely to improve.

The Brief Honeymoon of Miley and Argentina

The sentiment in Argentina’s media towards Miley is that the people had no honeymoon period with him, only a “honey day,” implying their favor towards him ended swiftly. The fickle nature of the Argentine populace is evident as those who celebrated Miley’s election soon took to the streets chanting slogans against him.

On December 20, 2023, a demonstration against Miley took place in Buenos Aires, described aptly as “people mountain people sea.”

Argentina’s inflation rate for the year is estimated to surpass 200%. Miley’s shock therapy approach has only further aggravated inflation. His decision to lay off 5000 civil servants, while initially laudable for its aim to streamline government, does little to address the extensive economic issues. The cycle of worsening conditions and desperate measures continues, and the path to success is perilously slim.

The Severity of Inflation in Argentina

A video on YouTube captures a woman from the suburbs of Buenos Aires lamenting that she can no longer afford the bus fare for her daily commute and has resorted to walking 30 kilometers. Notably, she was once a supporter of Miley.

It remains uncertain whether Argentina’s economy will collapse first or if Miley will be ousted from his position.

Despite the rising dissent and former supporters turning against him, Miley had been prepared. On December 14, the Argentine National Security Bureau announced, “There is no freedom without order, and no progress without order,” indicating military intervention without court orders for crimes disrupting public order. Additionally, a collective punishment approach was introduced, holding parents accountable for their underage children’s violations of these 12 directives.

Criticism abounds regarding Miley’s pre-election encouragement of disruptive protests. His preparedness for the social consequences of shock therapy suggests he’s not as irrational as some might think, hinting at powerful backing.

Miley’s overt conversion to Judaism and alignment with Israel have been highlighted as unusual by some, especially in light of Ukrainian President Zelensky’s appearance at his inauguration. Both Miley and Zelensky are considered to serve the interests of Wall Street’s financial capital and Jewish financial oligarchy. The similarities in their policies, particularly in handing over quality national assets to financial giants like BlackRock, are stark.

Despite his frequent media appearances, there is skepticism about the authenticity of his representation and the apparent influence of Wall Street’s Jewish financial oligarchs over global media. His defense minister’s aggressive stance against unauthorized protests and readiness to use force indicate a hardline approach, ironic given Miley’s rise through such street movements.

In essence, Argentina’s people, whether from the grassroots or the elite, who once enthusiastically voted for Western proxies, now face the consequences of their choices. The results of shock therapy are becoming evident with increased robbery, violence, and a police force unable to enforce laws due to inadequate pay.

Miley himself bears little personal responsibility; he can simply step down at the end of his term. But what of the people who rallied behind his drastic policies? They are left to endure the harsh realities these policies bring.

Reference: [Link to the source article]

Here We Go

Argentinians took to the streets to protest.

Let’s not dwell on other matters.

Reforms should start with government departments and civil servants.

That’s a bold move.

Argentina’s Drastic Economic Reforms Underway

In fact, Milei’s layoffs are just a replica of history.

In September 2018, also due to a debt crisis triggering an economic crisis, Argentina’s currency plummeted by 50%, and inflation was at 30% (better than now). At that time, the Argentine government announced the merger or closure of 9 cabinet departments, reducing them to 10, and the number of cabinet members dropped from 22 to 11. They also declared their intention to cut the number of government employees in half at that time.

Milei’s government layoffs are just one part of economic reform.

A few days ago, they devalued the official peso exchange rate by 54% and closed 9 government departments. Then, in one breath on television, they announced 366 economic reform measures and casually repealed over 300 Argentine laws.

On December 18th, Milei declared a state of emergency in the Argentine energy sector. Additionally, starting from January 1, 2024, the Argentine government will examine the operations of the National Electricity Regulatory Agency and the National Gas Regulatory Agency as a first step towards reducing public utility subsidies.

But Milei thinks it’s not crazy enough.

On December 27th, Milei applied to the Argentine Congress for greater powers to make it easier for his new policies to bypass parliamentary approval.

Milei’s next reforms will extend beyond the economy to the judiciary and other areas. The reform measures include increasing withholding taxes on agricultural exports, raising property taxes, using anti-money laundering laws against those who refuse to declare their US dollar holdings to the finance ministry, as well as canceling economic subsidies in various sectors, relaxing economic regulations in more industries, and minimizing civil litigation.

Milei’s “shock therapy” theoretically has a chance of success, but it’s too abrupt and brings significant short-term pain to the lives and economy of the common people. Especially with severe inflation problems, the central bank predicts that Argentina’s inflation rate will reach as high as 185% in 2023. Money loses its value, and it’s unclear if Argentina can survive this.

Now, many employers are starting to pay wages with milk or meat instead of money. Is Argentina heading into a barter system era?

If Milei’s package of over 300 economic reform decrees is fully implemented, the entire Argentina could descend into even greater chaos. However, Milei is not taking any chances and has already signed an order prohibiting public protests. Nevertheless, many people still took to the streets to protest against Milei’s new policies.

There’s no choice; people have to eat, even if it’s just for a day.

Feeling that Milei is too radical, the Argentine parliament announced that it would start reviewing all the economic reform measures signed by Milei from December 26th. If the review is approved, Milei’s economic reform measures will continue to be implemented. Otherwise, there is a risk that Milei’s economic reform measures could be stillborn.