In today’s issue:
- Britain bucks the global trend
- Argentina is setting the best example
- Will 2025 be the Year of the Chainsaw?
2024 has been a year in which Britain has lurched to the political left while much of Europe and North America has done the opposite. Labour now holds a large majority in His Majesty’s Parliament, yet across the Channel, France’s right-wing National Front has the largest number of seats in the National Assembly.
Earlier this year, in the historically progressive Netherlands, Geert Wilders’ right-wing Freedom Party became the majority partner in that country’s current ruling coalition. All polls indicate that, from February next year, Germany’s government will shift towards the right. The European Parliament, representing all EU member countries, has moved in the same direction.
Across the pond, Trump won a huge victory, and his coattails flipped the Congress to the right. Canada is widely expected to shift to the right in its upcoming elections, to be held by October latest.
Britain may thus be a political outlier in the North Atlantic region, but it is in the antipodes where one finds the country that shifted most dramatically of all in 2024: Argentina.
It has now been a year since Javier Milei won the presidency and, in celebration, waved his beloved chainsaw in front of a cheering crowd.
That chainsaw was intended to serve as a metaphor for what he was going to do with Argentina’s vast, inefficient and corrupt public bureaucracy. Over the past year, Milei has moved beyond metaphor and actually shredded half of all government departments. That’s right: they’re just gone. Poof!
He’s now trying to force the de-nationalisation of all state-owned industries through the parliament. If he gets his way, from the national airline to the state energy company, they’re all going to go. That’s quite the contrast to Labour’s plans to potentially re-nationalise the rail companies, public utilities and so on.
How is it all working out so far? Well, as it happens, Milei’s popularity ratings with the electorate are roughly where they were when he won election in late 2023. In other words, a majority still support him following all of the above chainsaw work.
Contrast that with things here at home, where the public appear already to have a severe case of “buyer’s remorse” after just half a year of Labour.
The contrasts could not be starker. Argentina really is Britain’s antipodean opposite.
What of the results so far? Well, would you believe, Argentina’s government didn’t run a deficit last year. That’s right, for the first time in over a century, the Argentine government funded itself through taxation alone.
While still elevated, inflation is way down, rising less than 3%/month. But wages are growing even faster. Deregulation has resulted in rents falling by about a third. Taken together these developments imply a sharp increase in the average working Argentine’s living standards.
That stands in sharp contrast to the UK, where real wages have outright declined over the past year. Then there is the impact of higher taxes, implying an even greater decline in real, after-tax disposable income.
So far, so good down under. But Milei is far from done. He has introduced plans to reduce federal taxes by 90% and shift the burden to the regions, who will henceforth need to compete with one another to offer the most attractive tax rates for households and businesses.
This is similar to the Swiss model of regional tax competition, credited with keeping Swiss taxes lower than their European neighbours for over a century.
When it comes to Argentina’s neighbours, Milei seeks to eliminate any remaining trade barriers with Argentina’s fellow Mercosur members. He has also stated that he desires a free-trade agreement with the US, notwithstanding Trump’s tariff plans. A recent meeting between Milei and Trump advisor Elon Musk may pave the way in that direction.
Meanwhile, Labour have done little if anything to warm-up relations with Trump or any members of his administration. If anything, they continue to shun them.
Perhaps this is because Musk is rumoured to be offering Reform a huge sum to accelerate their efforts to garner public support. But perhaps the causality is the other way around.
It doesn’t really matter. Argentina is on its way to a stronger relationship with the US whereas Britain appears to be moving in the opposite direction. Labour’s priority appears to be cosying up to Brussels in any case, offering closer, pre-Brexit-esque ties.
And so, in both domestic and foreign policy, Argentina and Britain are moving in the exact opposite directions. Fortunately, this provides us with an ideal “controlled experiment” that one doesn’t normally get in matters of public policy.
Argentina has had a rough and chaotic but ultimately successful “chainsaw” year. Britain’s has been somewhat smoother, but stagnant. They’re now in the ascendant; we’re slipping into recession. They’re on their way to the best relations they’ve had with the US in decades. We’re risking the “special relationship” in order to cosy up to the Brussels bureaucracy.
Perhaps an aspiring UK politician should ask to borrow Milei’s chainsaw? Or better yet, perhaps they should take a leaf out of Elon Musk’s book and find a way to leverage artificial intelligence to identify and eliminate bureaucratic inefficiencies?
Imagine what properly applied AI could do for the chronically dysfunctional NHS, for example. The possible applications for AI are endless. It is already being employed across most industries in some way, not only those associated with technology. These include the most fundamental, such as agriculture, forestry, fishing, mining and extraction.
If AI can make all those and more industries more efficient, imagine what AI’s transformative potential could do for your portfolio.
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Until next time,
John Butler
Investment Director, Fortune & Freedom
