Nice speech by Argentina’s Milei at Davos. Not sure how any of this works in practice, but surely refreshing after 40 years of socialism in Latin America.
Good afternoon, thank you very much. Today I am here to tell you that the West is in danger. It is in danger because those who are supposed to defend Western values are co-opted by a worldview that inexorably leads to socialism and, consequently, to poverty.
Unfortunately, in recent decades, motivated by well-intentioned desires to help others and by the ambition to belong to a privileged caste, the main leaders of the Western world have abandoned the model of freedom for various versions of what we call collectivism.
We are here to tell you that collectivist experiments are never the solution to the problems affecting the citizens of the world; on the contrary, they are the cause. Believe me, no one better than us Argentinians can testify to these two issues.
When we adopted the freedom model around 1860, in 35 years, we became the world’s leading power. However, when we embraced collectivism over the last 100 years, we saw our citizens systematically becoming impoverished, falling to the 140th position globally. But before we can have this discussion, it’s important to look at the data that supports why not only is free-market capitalism a possible system to end world poverty, but it is the only morally desirable system to achieve it.
If we consider the history of economic progress, we can see that from year zero until around 1800, the world’s per capita GDP remained virtually constant throughout the reference period.
If one looks at a graph of economic growth throughout human history, it would resemble an exponential curve, remaining constant for 90% of the time and sharply rising from the 19th century onwards. The only exception to this stagnation occurred in the late 15th century with the discovery of America.
But aside from this exception, between the year zero and 1800, global per capita GDP remained stagnant.
Now, not only did capitalism generate an explosion of wealth since it was adopted as an economic system, but if you analyze the data, you’ll see that growth has been accelerating throughout the entire period.
During the period from 1800 to 1900, the per capita GDP growth rate remained stable at around 0.02 percent annually, almost no growth. From the 19th century with the industrial revolution, the growth rate increased to 0.66 percent. At that rate, it would take 107 years to double per capita GDP.
Now, if we look at the period between 1900 and 1950, the growth rate accelerates to 1.66 percent annually. We no longer need 107 years to double per capita GDP, but 66. And if we take the period from 1950 to the year 2000, we see that the growth rate was 2.1 percent annually, meaning we could double our per capita GDP in just 33 years. This trend, far from stopping, remains alive even today. If we take the period from 2000 to 2023, the growth rate accelerated to 3 percent annually, implying that we could double our per capita GDP in the world in just 23 years.
Now, when studying per capita GDP from 1800 to today, it is observed that, after the industrial revolution, the world’s per capita GDP multiplied by more than 15 times, generating an explosion of wealth that lifted 90 percent of the world’s population out of extreme poverty.
We must never forget that, by the year 1800, about 95 percent of the world’s population lived in extreme poverty; while that number dropped to 5 percent by the year 2020, before the pandemic.
The obvious conclusion is that, far from being the cause of our problems, free-market capitalism, as an economic system, is the only tool we have to end hunger, poverty, and destitution worldwide. The empirical evidence is unquestionable. Therefore, as there is no doubt that free-market capitalism is superior in productive terms, the left-wing doxa has attacked capitalism for its alleged moral shortcomings, claiming it is unjust.
They say that capitalism is bad because it is individualistic, and that collectivism is good because it is altruistic, advocating for “social justice.” But this concept, which has become fashionable in the first world in the last decade, has been a constant in the political discourse in my country for more than 80 years.
The problem is that social justice is not only unjust but also does not contribute to the general well-being. Quite the opposite, it is inherently unjust because it is violent. It is unjust because the state is funded through taxes, and taxes are collected coercively. Can any of us choose not to pay taxes? This means that the state is funded through coercion, and with a higher tax burden, there is more coercion and less freedom.
Those who promote social justice start from the idea that the economy is a pie that can be distributed differently. However, that pie is not given; it is wealth generated in what Kirzner calls a discovery process. If a product is of good quality at an attractive price, it will do well and produce more. Thus, the market is a discovery process in which the capitalist finds the right path on the go.
But if the state punishes the capitalist for being successful and hinders this discovery process, destroys incentives, the consequence is that less will be produced, and the “pie” will be smaller, causing harm to society as a whole.
Collectivism, by inhibiting these discovery processes and hindering the appropriation of what is discovered, ties the hands of the entrepreneur and makes it impossible to produce better goods and offer better services at a better price.
So how is it possible that from academia, international organizations, politics, and economic theory, an economic system that not only lifted 90% of the world’s population out of extreme poverty but does so increasingly faster is demonized, claiming it to be unjust?
Thanks to free-market capitalism, the world is currently in its best moment. There has never been, in the entire history of humanity, a time of greater prosperity than what we live in today.
Today’s world is freer, richer, more peaceful, and more prosperous than at any other time in our history. This is true for everyone but particularly true for those countries that are more free, respect economic freedom, and the property rights of individuals. Because those countries that are more free are eight times richer than the repressed ones; the lowest decile of the distribution of free countries lives better than 90% of the population of repressed countries, has 25 times fewer poor people in the standard format, and 50 times fewer in the extreme format. And as if that were not enough, citizens of free countries live 25% longer than citizens of repressed countries.
Now, to understand what we come to defend, it is important to define what we mean when we talk about libertarianism.
To define it, I take the words of the greatest proponent of freedom in our country, Alberto Benegas Lynch (h), who says: “Libertarianism is the unrestricted respect for the life project of others, based on the principle of non-aggression, in defense of life, liberty, and property of individuals. Its fundamental institutions are private property, free markets free from state intervention, free competition, the division of labor, and social cooperation. Where one can only be successful by serving others with better quality or better-priced goods.”
In other words, the capitalist is a social benefactor who, far from appropriating others’ wealth, contributes to the general well-being. Ultimately, a successful entrepreneur is a hero.
This is the model that we are proposing for the future of Argentina. A model based on the fundamental principles of libertarianism: the defense of life, liberty, and property.
Now, if free-market capitalism and economic freedom have been extraordinary tools to end poverty in the world, and we are currently in the best moment in human history, why do I say that the West is in danger?
I say that the West is in danger precisely because in those countries that should defend the values of the free market, private property, and other libertarian institutions, sectors of the political and economic establishment, some due to errors in their theoretical framework and others due to the ambition for power, are undermining the foundations of libertarianism, opening the doors to socialism, and potentially condemning us to poverty, misery, and stagnation.
Because it must never be forgotten that socialism is always and everywhere an impoverishing phenomenon that failed in all countries where it was attempted. It was a failure economically. It was a failure socially. It was a failure culturally. And it also killed more than 100 million human beings.
The essential problem of the West today is that we must not only confront those who, even after the fall of the wall and overwhelming empirical evidence, continue to advocate for impoverishing socialism, but also our own leaders, thinkers, and academics who, sheltered in a mistaken theoretical framework, undermine the foundations of the system that has given us the most spectacular expansion of wealth and prosperity in our history.
The theoretical framework I refer to is that of neoclassical economic theory, which designs an instrumental that, unintentionally, ends up being functional to state intervention, socialism, and the degradation of society. The problem with neoclassicals is that, as the model they fell in love with does not map to reality, they attribute the error to supposed market failures instead of reviewing the premises of their model.
Under the pretext of a supposed market failure, regulations are introduced that only generate distortions in the price system, hinder economic calculation, and consequently, savings, investment, and growth.
This problem essentially lies in the fact that not even supposedly libertarian economists understand what the market is, because if it were understood, it would quickly be seen that there is no such thing as market failures. The market is not a supply and demand curve on a graph. The market is a mechanism of social cooperation where exchanges occur voluntarily. Therefore, given that definition, market failure is an oxymoron. There is no market failure. If transactions are voluntary, the only context in which there can be market failure is if there is coercion. And the only one with the ability to coerce on a large scale is the state that has a monopoly on violence. Consequently, if someone believes that there is a market failure, I would recommend that they check if there is state intervention in the middle. And if they find that there is no state intervention in the middle, I suggest they analyze it again because it is definitely wrong. Market failures do not exist.
An example of the supposed market failures described by neoclassicals is concentrated structures in the economy. However, without functions that exhibit increasing returns to scale, whose counterpart is the concentrated structures of the economy, we could not explain economic growth from 1800 to today.
Notice how interesting. From 1800 onwards, with the population multiplying more than 8 or 9 times, per capita product grew more than 15 times. There are increasing returns, which led extreme poverty from 95% to 5%. However, the presence of increasing returns implies concentrated structures, what would be called a monopoly. How can something that has generated so much well-being for neoclassical theory be a market failure? Neoclassical economists, think outside the box. When the model fails, don’t get angry with reality, get angry with the model and change it.
The dilemma facing the neoclassical model is that they claim to want to improve the functioning of the market by attacking what they consider failures, but by doing so, they not only open the doors to socialism but also undermine economic growth. For example, regulating monopolies, destroying their profits, and smashing increasing returns would automatically destroy economic growth.
In other words, every time you want to correct a supposed market failure, inevitably, due to not understanding what the market is or falling in love with a failed model, you are opening the doors to socialism and condemning people to poverty.
However, in the face of the theoretical demonstration that state intervention is harmful and the empirical evidence that it failed – because it could not be otherwise – the solution that collectivists will propose is not more freedom but more regulation, generating a downward spiral of regulations until we are all poorer, and everyone’s life depends on a bureaucrat sitting in a luxury office.
Given the resounding failure of collectivist models and the undeniable advances of the free world, socialists were forced to change their agenda. They abandoned the class struggle based on the economic system to replace it with other supposed social conflicts equally harmful to community life and economic growth. The first of these new battles was the ridiculous and unnatural fight between man and woman.
Libertarianism already establishes equality between the sexes. The foundational stone of our creed says that all are created equal, that we all have the same unalienable rights granted by the creator, among which are life, liberty, and property.
The only result of this radical feminist agenda is increased state intervention to hinder the economic process, providing jobs for bureaucrats who contribute nothing to society, whether in the form of women’s ministries or international organizations dedicated to promoting this agenda.
Another conflict that socialists pose is that of man against nature. They argue that humans harm the planet and that it must be protected at all costs, even advocating for population control mechanisms or the bloody agenda of abortion.
Unfortunately, these harmful ideas have strongly permeated our society. Neo-Marxists have managed to co-opt the common sense of the West. They achieved this thanks to the appropriation of the media, culture, universities, and yes, also international organizations.
Fortunately, more and more of us dare to speak out. Because we see that if we do not confront these ideas head-on, the only possible destiny is more state, more regulation, more socialism, more poverty, less freedom, and consequently, a worse quality of life.
The West, unfortunately, has already begun to travel this path. I know it may sound ridiculous to suggest that the West has turned to socialism. But it is only ridiculous to the extent that one restricts oneself to the traditional economic definition of socialism, which establishes that it is an economic system where the state owns the means of production.
This definition should be updated to present circumstances. Today, states do not need to directly control the means of production to control every aspect of individuals’ lives. With tools like monetary issuance, debt, subsidies, interest rate control, price controls, and regulations to correct supposed “market failures,” they can control the destinies of millions of human beings.
This is how we reach the point where, under different names or forms, a good part of the generally accepted political offers in most Western countries are collectivist variants. Whether openly declaring themselves communist, socialist, social-democrats, Christian democrats, neo-Keynesians, progressives, populists, nationalists, or globalists. In essence, there are no substantive differences: all argue that the state must direct all aspects of individuals’ lives. All defend a model contrary to what led humanity to the most spectacular progress in its history.
We come here today to invite other Western countries to return to the path of prosperity. Economic freedom, limited government, and unrestricted respect for private property are essential elements for economic growth.
This phenomenon of impoverishment produced by collectivism is not a fantasy. Nor is it fatalism. It is a reality that Argentinians know very well. Because we have already lived through it. Because, as I said before, since we decided to abandon the model of freedom that had made us rich, we have been trapped in a downward spiral where every day we become poorer.
We have already experienced it. And we are here to warn you about what can happen if Western countries that became rich with the model of freedom continue on this path of servitude.
The Argentine case is the empirical demonstration that no matter how rich you are, how many natural resources you have, no matter how capable the population is, how educated it is, or how many gold bars are in the central bank’s vaults. If measures are adopted that hinder the free functioning of markets, free competition, free price systems, if trade is hindered, if private property is attacked, the only possible destiny is poverty.
In conclusion, I want to leave a message to all the entrepreneurs present here and those watching from every corner of the planet. Do not be intimidated by the political caste or the parasites living off the state. Do not surrender to a political class that only wants to perpetuate itself in power and maintain its privileges.
You are social benefactors. You are heroes. You are the creators of the most extraordinary period of prosperity we have ever experienced. Let no one tell you that your ambition is immoral. If you make money, it is because you offer a better product at a better price, contributing to the general well-being.
Do not yield to the advance of the state. The state is not the solution. The state is the problem itself. You are the true protagonists of this story, and know that from today, you have an unwavering ally in the Argentine Republic.
Thank you very much, and Long live freedom!
