Recently, Argentina’s new Finance Minister, Caputo, announced a fiscal surplus of 518.4 billion pesos, creating a stir in economic discussions worldwideIt seems that President Javier Milei is indeed proving to be a formidable figureThis country has been grappling with significant economic troubles: fiscal deficit, surging inflation, and sluggish growthAt least the news of fiscal surplus marks a positive turn in the roadHowever, does this mean that neoliberal economics is the magical remedy for Argentina's economic ailments? It is premature to jump to that conclusion.

First, we need to clarify what a fiscal surplus really meansIt can also be termed as "contractionary fiscal policy." In layman’s terms, it translates to austerity measures, which involve cutting government expenditures, with departments spending less or even refraining from spending at allA critical examination of Milei's economic reform measures reveals these elements quite explicitly.

For instance, the government budget has been frozen, public spending slashed, and institutions streamlined from 18 to 9 departments

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The workforce was also reduced, with 50,000 civil servants laid offVarious government expenses and subsidies are being cut sharplyTo project a more relatable image and to adhere to his political agenda, President Milei recently took a flight to attend the Davos Conference, reportedly saving $392,000 on the tripWhen we simplify the numbers, that fiscal surplus of 518.4 billion pesos approximates to around $61 millionTherefore, Milei’s international flight contribution alone accounted for approximately 0.65% of the supposed surplus—and we still need to consider the salaries of the 50,000 public employees who were dismissed.

To put it succinctly, what is being termed as a “fiscal surplus” is essentially a byproduct of steep cuts in government spendingWhile we acknowledge the efforts and results of Milei’s government in addressing the fiscal deficit, it must be stated that contractionary fiscal policies typically lead to economic contraction

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According to the latest IMF forecast, Argentina's GDP is expected to decline by 2.8% throughout 2024, with the report pinpointing the causes of this anticipated negative growth to the significant policy shifts in Argentina’s economic strategies.

Moreover, two critical numbers deserve attention: inflation rate and poverty rateIn 2023, inflation in Argentina has soared to a staggering 211.4%, reaching the worst levels since 1991. Observing the figures from last December, the most astonishing increases were seen in goods and services, which rose by 32.7%, with healthcare and transportation soaring by 32.6% and 31.7%, respectively.

In an alarming comparative analysis, Argentina's inflation rate now surpasses that of Venezuela, long considered the inflation heavyweight in South AmericaThe second significant figure is the poverty rate, which is closely linked to inflationThe consequences of inflation are twofold: exorbitant prices severely threaten the basic living standards of ordinary people, pushing many toward extreme poverty

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Additionally, the devaluation of currency due to inflation diminishes the assets of the poor, exacerbating wealth disparity and polarization.

Overall, while a fiscal surplus might seem like a positive development for everyday citizens, offering more potential for government investment in various sectors such as infrastructure, education, and healthcare, the reality paints a more mixed pictureWith fiscal surpluses, the government could theoretically enhance public services—repairing and building infrastructure like roads and bridges to facilitate smoother daily commutes, improving educational conditions, and ensuring better healthcare services with updated equipment and more resources to provide efficient medical careHowever, these potential benefits are overshadowed by the immediate and severe impacts of austerity measures.

For President Milei, who has only been in office for under two months and is championing neoliberal reforms, achieving a fiscal surplus becomes a significant "political achievement." The rapid accomplishment might lend weight to his narrative that his policies are effective, potentially solidifying his support among constituents who buy into his ideology

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This could also fortify his political stance domestically, giving him leverage as he attempts to implement further policies and shaping an image of capable economic management internationally.

Yet, we cannot assume that the attainment of a fiscal surplus automatically signals successful economic reformEconomic reform is an intricate and protracted process, with fiscal surplus being just one aspect—merely a phase within a vast systemTo determine whether a nation’s economic framework is genuinely healthy and sustainable, it's vital to assess several factors in unisonFor instance, is the industrial structure optimally utilized? Has the nation diversified its economy, becoming less reliant on single industries to bolster resilience against market fluctuations? Are there sufficient and stable employment options for its citizens, ensuring a reliable income and improved quality of life? Furthermore, how vibrant is the internal market in terms of consumer activity, and is there a sustainable cycle in place for economic growth? Are the external trade relationships steady and constructive, granting Argentina enough competitive capability in international markets?

In my perspective, idolizing free-market principles and naively believing in the miracles of planned economics reflect humanity's quest for economic advancement—a form of utopianism at best

A free economy advocates for market self-regulation, contending that minimizing government intervention allows the ’invisible hand’ of the market to operate efficiently and thriveHowever, the realities often pose contradictions, as the market itself harbors various flaws—such as monopolies, asymmetric information, and externalities—leading to market failures and affecting regular economic order and equityOn the other hand, while planned economies have the advantage of centralized decision-making, enabling swift execution of significant projects, they can also fall victim to inflexibility and sluggish responses to market shifts, stifling the dynamism and creativity of economic participantsTherefore, neither unilateral veneration for free-market economics nor blind faith in planned economies serves as a universal remedy for healthy and sustainable economic development; rather, it is essential to strike a balanced approach that aligns more closely with the specific circumstances of a country.