Economics

The Highway Out of Serfdom


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Economics
By Moritz Eichhorn

This interview was first published in the Berliner Zeitung, and reproduced here with their permission. We would like to thank Dr Rainer Zitelmann, historian, sociologist and occasional IEA author, for facilitating it.

Prof Agustín Etchebarne is the Director General of Libertad y Progreso, a libertarian think tank based in Buenos Aires, Argentina.

There has never been an experiment like this before. For the first time in history, a libertarian politician has become a head of state – and immediately started shrinking it. He closed half the ministries, fired more than 50,000 civil servants, and cut benefits for millions of citizens. Javier Milei is changing the character of Argentina in record time. After one year, he’s got a lot to show for himself: inflation has fallen massively, and for the first time in 123 years, Argentina had no budget deficit in 2024. But the population is paying a high price. The middle class, often dependent on government subsidies, is shrinking. 53 percent of people now live below the poverty line. Nonetheless, the majority supports the president.

On this side of the Atlantic, many were initially caught off guard by Argentina’s new course. After all, the country had defaulted nine times in its history and in 2020 was again unable to service $65 billion of international debt. Argentina was considered notoriously fiscally unreliable. But Javier Milei’s anarcho-capitalist agenda did not come out of nowhere. For more than 20 years, libertarian thinkers and scholars have been preparing the ground for this revolution. Perhaps their most prominent representative is Agustín Etchebarne, director of the think tank Libertad y Progreso (Freedom and Progress). In a video call from his office in Buenos Aires, he explains why he considers libertarianism to be profoundly humane, the patterns behind a nation’s economic rise and decline, and what he would demand in the upcoming German federal election.

Professor Etchebarne, after Libertarianism was relegated to the sidelines of relevant politics for decades it has recently staged an impressive comeback, most notably with Javier Milei’s election in Argentina. As one of the leading libertarian thinkers in South America, what kind of freedom is Libertarianism to you?

Freedom to me is to accept that everyone owns his or her body, his or her mind, and then is the owner of the fruit of their works. That’s private property. And each time that you have institutions in a society that support this idea, the right to life, to liberty, and property, then you see human flourishing. If you don’t accept this, then you need the state, for instance, to implement a version of social justice, or if you want to redistribute wealth, so some people subsidise others who are less talented, then you need to use force. You need to use some type of violence. So, you use the state as a means to take from some to give to others. But that’s a state of violence. And I think that when you get out of the human free cooperation, then it’s a less successful society.

We speak a lot about military fights for freedom as in Ukraine, about freedom of speech vs. fake news, freedom of movement when it comes to migration. But debates about economic freedom are rare. Why do you think is that?

Well, I believe that you cannot divide freedom. For instance, now we have problem with the exchange rate in Argentina, and now it’s better than last year, but we still have a problem with some. But if you don’t have access to foreign money, then you cannot leave the country. So there is a connection between economic freedom and the freedom to travel. And that applies to anything. If you have huge tariffs, then you don’t have access to many goods, or the poor have no access to telephones, computers, hence connections to others. Economic freedom is inextricably connected to other freedoms. The worst thing is when the state has a lot of power to intervene in economics, then you don’t have any freedom at all. Because if the state has the power to make a businessman rich or to make him poor, then the power it has over his mind is enormous.

Has this been the case in Argentina?

You see it every day in Argentina, because we have a lot of corporativism and crony capitalists. You see people who have got 10 billion dollars, but they cannot speak freely. Because they are dependent on the state, and if they withdraw their support for the ruling party, whatever their business, they are done. When Christina Kirchner was president, I’m sure that most of these people hated her, but they couldn’t say anything.

Are they speaking up in favour of President Milei now?

Well, not everybody is in favour of President Milei, because the crony capitalists are now in danger. If you open the borders for trade and you decrease the tariffs, then there are a lot of people that will be hurt by the new freedom. After eight decades of protectionism, if you open up the economy, firms have to change. They have to invest, and some of them are going to disappear. In a closed economy, you have the same firms 100 years later with the same families. In a free economy nepotism is under threat. If you open the gates, some of them are going to disappear, but you will see young people, who are going to start companies we cannot even imagine. But that’s why Libertarians like Milei don’t believe in selecting which sector is going to be the one that is going to be the best sector of the economy.

Germany has grown more statist, especially in an effort towards turning our economy green. How does a libertarian government deal with climate change issues?

During the Cold War, the economic and political superiority of liberal democracies over communist regimes was evident, as demonstrated by the differences between West and East Germany, or between South and North Korea. After the fall of the Soviet Union, the Western left underwent a significant transformation. It largely abandoned traditional economic discourse and focused on cultural and social issues, a phenomenon some refer to as “cultural Marxism.” This approach incorporated topics such as ecology, climate change, and the defense of minority rights, including the LGBTQ+ community and women’s rights. However, instead of promoting these matters from a classical liberal perspective, it adopted a view influenced by Marxist dialectics, emphasizing conflict and class or gender struggle. Under this new orientation, the left managed to regain influence in Europe, adapting to the post-Cold War context and focusing on emerging social and cultural dynamics.

It’s somewhat ironic that the teachings of the Austrian School of Economics, President Milei and you espouse, which also feature prominently in Elon Musk’s vision for America are absent in political discourse in the German-speaking world. Why do you think that is?

Well, I think it happens to every culture, maybe in every civilisation, perhaps even in every family. They say, the first generation are tough guys, soldiers, they conquer a territory and defend it. The second generation is similarly tough, they are the constructors, the engineers, they build the buildings, they build the bridges, the fortress, the roads. The third generation is more sophisticated. They are the architects, you know, the ones who beautify the cities. Very important, the fourth generation, this is the peak of the civilisation, and you have the poets, you have the musicians that you got, Goethe and Beethoven. The fifth generation is the problem. They believe that they have all the rights and no responsibilities, no duties, and those are the ones who destroy things. So Argentina was very rich when Europe was very poor. Now it’s exactly the opposite. Europe is very rich, you are probably into the fifth generation. Germany has simply forgotten where it’s wealth and power comes from.

One of Germany’s major publications, “Die Zeit”, recently published an essay in which Milei was described as a right-wing extremist leading Argentina into fascism. Does libertarianism lead to fascism?

This mischaracterization arises from a combination of ideological misunderstandings and deliberate political framing: Many critics fail to differentiate between authoritarianism, fascism, and libertarianism. Fascism expands state control over every aspect of life, whereas libertarianism advocates for its significant reduction. The only commonality is the rejection of a status quo. Those entrenched in leftist or statist ideologies often see libertarian policies as a direct threat to their vision of government as a tool for redistributive justice or social engineering. Labelling libertarians as “extremists” or “fascists” becomes a rhetorical strategy to delegitimise them. The essence of libertarianism lies in dismantling coercive systems of power—be it fascist, socialist, or bureaucratic statism. It is a movement toward decentralisation, the rule of law, and the sovereignty of individuals. Such accusations serve to confuse, rather than clarify, the ideological landscape.

President Milei is changing the course of Argentina extremely fast. At home and abroad critics claim he is ignoring the social costs. Are the reforms heartless?

Exactly, very quickly. But it’s very difficult. The people are struggling. In everyday life, people are not better off today than one year ago. It will take a few years until you get the economy growing. And then there will be certain people that will suffer for many years, because as we were saying, some companies are going to disappear, they will have to reinvent themselves. In 10 years, you will probably see Argentina flourishing again. And just as it takes time for a poor country to become rich it takes time for a rich country to become poor, as Argentina did and as Germany is doing now. And people don’t notice it right away, because as the world is still growing, you still have a flourishing economy worldwide due to others.

Is the four-to-five-year election cycle of modern democracies an impediment to good long-term decisions and continuous prosperity? 

The left always speaks about democracy. But in the Argentinian constitution, the most important thing is the Republic. Our constitution establishes the nation as a federal republican representative system, emphasising the separation of powers and the rule of law over the mere election of officials. This framework, inspired by Montesquieu’s philosophy, seeks to prevent the concentration of power through a system of checks and balances among the executive, legislative, and judicial branches, thereby promoting long-term stability and prosperity. However, the success of this system can lead to complacency in subsequent generations, making them susceptible to populist ideologies that offer immediate benefits at the expense of foundational principles. Therefore, it is essential to maintain robust civic education, encourage active citizen participation, and preserve institutional integrity to uphold the values that ensure sustained prosperity.

Independently of the anarcho-capitalist economic argument Milei makes and implements, what also sets him apart is his eccentric and colourful style i.e. wielding a chainsaw. How important is the cultural aspect for winning people over?

Well, that’s a very good question, and it’s very difficult to answer. I think Milei is the result of, maybe 20 years of previous speakers on Argentinian TV, talk shows our members appeared on, 20 economists with an Austrian School of Economics review. That is still uncommon in the US and in Europe. I’ve seen economics textbooks at the London School of Economics, omitting the Austrian school altogether. Even though they had Hayek, they had Friedman, it seems they have forgotten.

Why do you think that is?

The ideas of the unimpeded free-market economy and the dangers of the state were debated in Vienna in the beginning of the century. But they did not come to fruition until much later. At certain moments in time, certain ideas have a chance of becoming reality and policy, the so-called Overton Window. And 20 years ago, we decided, in our institution Libertad y Progreso, to start speaking completely outside of the Overton Window in Argentina about Libertarianism. And after 20 years, I think we moved it.

And of course, when Milei entered the scene, about five years ago, he had great timing. We were early adopters, but he came at the exact right moment. Everybody is overwhelmed by what he’s doing, because he put emotions into it, which is essential.

Would you say Milei’s victory and his reforms would not have been possible without the work of the foundation Libertad y Progreso?

Milei managed to seize a historic moment in Argentina, combining his charisma and disruptive proposals with a deep connection to the public’s discontent. In this context, Libertad y Progreso played an important, though not exclusive, role in spreading the ideas of economic freedom and critiquing statist policies, contributing to a broader cultural shift.

The foundation worked for years producing research, fostering debates, and proposing policies that helped lay the intellectual groundwork for the reforms being discussed today. However, it would be an overstatement to claim that his victory and reforms would have been impossible without this work. Rather, we contributed our part to a much larger collective effort.

Is this style of confrontative disruption a sustainable way to govern for the next 4 years?

I believe that we are in the initial phase of economic liberalism in Argentina. The beginning is like being teenagers of liberalism. Then you will get a phase, I hope, where it will be more calm, more rational, more dialogical. I believe in what we could call the dialogical reason. A constructive exchange in which both sides must accept the other’s views. But that’s not the state that we are in in Argentina. We are still shouting at each other.

You seem confident in the success of Milei’s project. Still, do you think it could fail in its attempt to rejuvenate the economy and more importantly, improve the lives of Argentinians?

Yes, I think it’s going to be difficult, because it will take a while. It’s amazing what the government has done already, because the first half of the year was very tough, but support for Milei remains high. This is promising because the people, as I said, are not doing well. They are hopeful for a better future, but they have high expectations. To deliver on them is harder the higher they are. And I think there are many profiteers of the old system who would love to see Milei fail. We’ve got parliamentary elections in October. I think Milei’s party will win, but if they lost, that would be a disaster.

Is the political opposition no problem for him?

They have selected Christina Kirchner as leader once again. She’s a corrupt leader. She was found guilty of graft in court twice. She’s appealing the verdict trying to go to the Supreme Court which could take a few years. But the people know that she’s corrupt. The opposition is not a real threat right now. But in 2026, we need to see reforms continue fast because unemployment could go up again which would be a disaster.

When do you think will the population need to see results to stay on course with the president?

They already see results. Because the first result that they are seeing is that the inflation rate going down. For instance, the producer price index, was only 1.2% last month. In December of last year, the PPI was 54%. The economy is buzzing, slowing down inflation. Inflation, for instance, last year was 211%. This year it’s going to finish around 115%. And if they win the October election, inflation would be around 1% per month or lower. And that will have an immediate effect on the lives and the livelihoods of large parts of the population.

But when will the hardship that has become significant since the reforms began, with tens of thousands of people in poverty, cease?

We have and continue to have a social safety net. People below the poverty line receive state support.

But the dissolving middle class is the real problem, right?

Yeah. You will see that the poverty rate is starting to go down. And it’s probably going to go still further down next year. But still, the people will be feeling the strain. And companies, at some point, some employers will go bankrupt. When that happens, we will need to see on the other side huge investments in new enterprises for, say, mining and agriculture. Finally, one risk is the weather. In Argentina, weather is very important. If we get La Niña, that could negatively affect the harvests and livestock and we need strong exports next year.

So, if everything goes according to plan with the election, you don’t have La Niña, and you take out the export duties, you invest enough in agriculture and in mining when will the country really turn around?

I think economists will see it first. Because we are already seeing the recovery. We’re already seeing that the economy is growing at about 8% annual growth. Next year we are probably going to grow about 5%. But there are two metrics. One is what we see in the numbers, and the people, what they are feeling. And this is going to be very different in different sectors.

In some sectors, they are going to be doing very well. Others will struggle, for instance, the textile sector. And we will continue to decrease the size of government. Former civil servants will have to look for jobs, and they are not used to work in the private sector. And you have something that is very, very difficult. Even if you grow at a 5% or 6% per year, some of the highest growth rates worldwide, we will still have a quarter of the workforce remaining unemployed.

Why is that?

We have a disastrous education system. They destroy the minds of students. First, by giving them government checks. You destroy a person if you give him government handouts for 20 years. We’ve got around 76,000 people who’ve been receiving transfers because they were handicapped. But the vast majority has no impairments. The system was corrupt. And they got falsified medical certificates. When you do this to a person, you are destroying that person. You’re actually handicapping them.

76.000 people does not seem like such a large number in country with a population of about 47 million people.

It is not limited to the recipients of these illegitimate handouts. They are destroying their families. And that happened to 2 million people. And there are numerous schemes to give money to people. About 8 million Argentinians were receiving checks from the government for one reason or another. But the misappropriation of these funds is not as bad, as the destruction of those people. You really destroy those families.

How so?

Because you destroy their self-esteem. The people, many able-bodied, looking for meaningful work are instead given money for nothing. And they start to feel resentment. The government gives them money, but they resent it. When you give money to people for not working, you are destroying them.

That’s an uncommon assessment in German public discourse. Government support for people to live with dignity even if they could work, is considered a minimal humane standard.

You take away people’s sense of purpose. They get the message: you’re not needed. And their family might look at them and say: he brings home the check, but not because he works, or because he’s smart or diligent or hardworking. But just because he exists. Somebody else could receive the check.

There have been two countries, the United States and Argentina, where fundamental opposition to the bureaucracy is (to be) part of the government agenda. Milei and Donald Trump get along very well. But one thing that does not square are the tariffs Trump has promised to implement. How does that work in a free market?

It doesn’t, I really think it’s terrible. Tariffs are terrible even for their intended purpose. When you increase tariffs, then the risk of war is higher, not lower. They believe, it’s a problem not of economics, but of geopolitics. The US fears China. They fear China because they believe they have to remain the only superpower in the world. That’s not going to happen. We have a huge risk there, a worldwide risk and I think they are completely mistaken on the subject. And they are increasing tariffs on Mexico and Canada, which is a terrible mistake. You don’t do this to your allies. The US and Canada together has only 400 million inhabitants. A free trade agreement between all the Americas, would encompass a 1 billion people. Then you get significant influence vis-a-vis China.

It seems the European Union has heeded the lesson of free trade with the single market on our own continent. But the war between Russia and Ukraine happened anyway. Is free trade really the way to avoid military conflicts?

Europe endured centuries of warfare before embracing free trade, which, as Montesquieu observed, “softens manners.” Frédéric Bastiat echoed this sentiment, suggesting that if goods don’t cross borders, soldiers will. Visionaries like Jean Monnet, Konrad Adenauer, and Charles de Gaulle expanded European commerce, achieving unprecedented peace over the past half-century. Had Russia been integrated into this common market with unrestricted trade, the conflict between Ukraine and Russia might have been averted.

What effect does Argentina’s path have on its neighbours in South America?

I hope for a knock-on effect, but there isn’t one yet. When Chile did impressive work for 30 years, we were arguing to follow their example constantly, but our politicians didn’t care. They cared only about the votes. But on an individual level the reforms appear to be inspirational. I went to the US for a conference with 500 think tanks from around the world. When you mention Argentina, people now know Maradona, Messi and Milei.

The perception in Germany is very different. The leader of the Conservatives, Friedrich Merz, who’s likely to be the next chancellor has called Milei’s reforms “ruinous” and there’s been widespread critique in the media of Milei’s brand of disruption. Many seem to hope Milei will fail.

Because they think if he fails, that disproves free market economic models are sustainable and superior to large-scale state intervention. A big fear of the collective left is the success of Trump and Milei. And they say that explicitly. If Milei’s reforms work, we are going to change the Constitution.

Why change it and how?

Our Constitution is horrible right now. Constitutions of the 19th century in the US and Argentina were free constitutions for free people. Not anymore. You have in fact a new constitutionalism, even in Germany, in Europe, where the government has much more power over the people than it used to.

Are you speaking about constitutional amendments?

Exactly. And they changed the Argentinian Constitution. For instance, we got an article 14 with all the liberties. But they added an article 14B, which says exactly the opposite. Article 14 states you are free to work, to teach, to learn, to engage in free enterprise, all the freedoms we cherish. But in article 14B, they added so called social rights. For instance, the right to have an obligatory pension system was enshrined here. But my “right” results in the government taking 30% of your income every month.

Is all taxation theft for you?

Well, I think at a certain point, it is theft in Argentina. Because they are taking almost all of your money. But not only through taxation, via the pension system as well. It’s the worst theft of all. I made a calculation with a minimum salary in Argentina. They take 11% of your salary every month, but also another 16% from your employer. And they charge you for the unions another 2%. So they take 29% of your earnings. They claim, this is for you. Imagine if you saved these 30%. I made a calculation, with only 5% interest rate, which is give or take the real rate of the last 600 years in Europe. And if you save for 14 years, you could buy five houses in Argentina. If you have a spouse who works, another five houses. They are taking 10 houses away from your family. You could just take the 30% that you pay a month and put them in ETFs and you would have a much higher return than if the government takes it and just distributes it.

You share the president’s vision and support his policies. But nobody’s perfect. What did he get wrong in his first year in office?

I am vocal about my criticism of certain decisions. He nominated two judges for the Supreme Court. One is very good, Manuel García Mansilla. The other we believe to be very bad, who is Ariel Lijo. This is very important because the Supreme Court has only five members. The Senate didn’t approve his candidates. This is part of a negotiation, of course, because the Senate is Peronist. But I have to say, this is terrible for the Supreme Court.

And you have issues with his personality, which is probably needed to make these changes in Argentina. But you have a side effect. And the side effect is that it’s very difficult to build teams in the government. It’s a one-person show. It’s not a one-person operation, but it’s very difficult to build teams. And lastly, Milei failed to go hard on the unions. All of us still pay those percentages to the unions. But that includes many jobs where unions don’t even exist, like NGOs or football teams.

In the upcoming German election campaign economic issues will be at the forefront of voters’ concerns. Germany has experienced practically no growth this year. Our economic model of producing manufactured goods with cheap energy from Russia and exporting them to China has become obsolete. Is there a lesson for Germany in Argentina’s libertarian disruption?

If I were a politician in Germany, I would reopen the nuclear plants. Because that is, in my opinion, a message to everybody: we are no longer woke. And that message is important. Also, if you don’t deregulate the economy, you’re not going to be able to compete. One thing that is true of Argentina, Germany and all countries that are struggling economically: It has to become harder before it can get better. There’s not going to be a reward if you don’t pay the price. And there are so few people who want to pay that price. You have to be brutally open about the risks and costs of different policies and you probably need a voice like Milei: somebody who’s willing to fight.


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