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the economy that Javier Milei thinks

In English it is usually identify economics as the “dismal science” (dismal science), expression coined in the 19th century by the Scottish writer and philosopher Thomas Carlyle. With these words he referred to the Thomas Malthus theoryan economist who claimed that humanity she was trapped in a world where population growth would always put pressure on natural resources and bring misery.

These ideas are found in the antipodes of Milei’s thought. The President is a optimistic about the economy and he is convinced that the data confirms that, in the long term, all countries would have the same product per capita, he says enthusiastically.

This phenomenon is explained by Milei in different worksamong them his paper “From the Flintstones to the Jetsons Wonders of Technological Progress with Convergence” (Economic News – May / August 2014). Milei begins by pointing out that “The apocalyptically pessimistic, since Malthus, going by Ricardo, Marx, Keynes, Harrod and Domar, even the Club of Rome, were always wrong. Analyzing History, believing that the best is yet to come, even if from time to time there is a crisis, It is not excessive optimism”.

Evaluating the last 2,000 years of history, he states that the growth rate is accelerating. In that long period, and as a consequence of the material achievements, the growth rate of the per capita product was 0.13% annually, which implied that the income level decreased. multiplied 12.9 times, while the population did so 26.9 times.

However, Milei warns that doing the calculation in the tips hides a lot of information. Thus, “separating the evolution of Gross Domestic Product per inhabitant (GDP per capita) between the period from the year 1 to 1,800 and the remaining 200 yearswe can see that the growth rate went from 0.02% to 1.1%while the income level that during the first period had grown by 40.8% (concentrated in the 14th and 15th centuries), during the second period it multiplied 9.18 times. This implies that during the last two centuries the per-capita growth was 817.7%being from 92.0% in the XIX and 378.1% during the last”.

Another way to look at the acceleration of growth rate is measured in the number of years it took to double the GDP per-capita. In this regard, he points out that chronologically, the first to achieve this was the United Kingdom, which took 58 years (1780-1838), then The United States followed with 47 (1839-1886), Japan with 34 (1885-1919), Italy with 21 (1890-1911), Spain with 18 (1950-1968), South Korea with 9 (1978-1987) and China with 7 (1987-1994).

P9 – GDP GRAPH mundi_opt.jpeg

Human capital

Milei considers that the acceleration of the growth rate It cannot be attributed solely to the forces of the accumulation of productive factors (capital and labor). In this regard, he maintains that “for reconcile this acceleration of growth With the process of accumulation, technological change has to increase over time at a rate fast enough to counteract the limitations of production. From there it is shows the importance that it assigns to human capital.

Milei predicts that “progress leads to entering a singularity in economicswhere economics would cease to be the science of scarcity management and become the science of the study of human action in a context of radical abundance.”

After considering that “a much better world is possible”, Milei details what must be done to achieve this goal and to accelerate the transition process, which can well be associated with the axes of his government program.

In this sense, he maintains that “it is necessary to: stimulate the formation of human capital (health and education), keep inflation low, preserve fiscal balance, promote foreign trade and competition, make the labor market more flexible (for new entrants), stimulate savings via a stable macro and protect property rights so that investment not only provides the capital stock to produce more but also so that it bring with it technical progress that allows a leap in productivity, real wages and consumption”.

From now on, to achieve these long term goals, President is concerned about stabilizing the economy in the short term. “These months are critical,” he usually says.

In this sense, it trusts that the application of its fiscal adjustment and restrictive monetary policy produce a noticeable drop in inflation starting at the beginning of April. He comments that “if that happens, even we could even think about eliminating the stockswhich would cause a shock of confidence.”

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