Can Kemi Badenoch sell Mileinomics in Britain?

Reform UK - leading in every national opinion poll since mid-April - have successfully labelled Conservatives and Labour as the “uniparty”. This characterization has some merit given their oversight over sustained higher spending and taxation, as well as their alignment to economic and social issues pushed by globalist organisations. Badenoch has perhaps calculated that there is little electoral appetite for centrist competence. She looks set to plough an alternative furrow. A furrow being cultivated in The Pampas – the fertile breadbasket of Argentina.   

But what is the verdict on Argentinian “Mileinomics “ almost two years on from the President's ascent to power? Milei’s was an election victory that owed much to fatigue with long-standing mismanagement of the Argentinian economy. Peronism - the dominant form of economic governance in Argentina for most of the post-World War Two era - was swept aside by a leader whose intellectual insprirations include former UK Prime Minister, Margaret Thatcher. Where Peronism sees social welfare programs and state-led development at its heart, Mileinomics emphasises the role of free markets, deregulation and reduced government spending. The contrast could not be starker.

There is undoubtedly pockets of sycophantic takes of Milei’s record amongst the economic commentariat. This verges on allowing ideology to override the data. But if Badenoch, and other centre-right politicians in economies on challenging fiscal paths, are to sell a duplicated model to a sceptical electorate they will need evidence that the Argentinian experiment is working.  

The first thing worth noting is that a range of key economic variables are undoubtedly revealing encouraging progress. Inflation – for so long the scourge of Argentinean leaders – had been running as 290% a year in early 2024, but has since fallen to 39%. The International Monetary Fund (IMF) expect inflation in Argentina to average 14% next year. The public finances have also markedly improved with a budget surplus now worth 1.8% of GDP, reversing from a deficit of almost 3% in 2023. After two years of a shrinking economy, GDP growth is now expected to head to average 5% over the next two years. That would be GDP growth that is double the South American average. Poverty levels, having initially spiked under President Milei, pulled back in the second half of 2024 with the official Argentinian poverty rate now at 38%, having risen to as high as 53%. This official measure of poverty is now lower than when Milei ascended to power. By any benchmark these are impressive figures.   

There are however ongoing challenges. After all economics at its heart is, and always will be, about trade-offs. The stabilisation of the Argentinian Peso and relaxation of capital controls for the first time in six years has created a volatile current account balance - slipping into deficit in Q1 2025, and putting pressure on Argentina’s trade balance. The IMF last week extended a further $2 billion of its $20billion facility to support the transition to a free-floating currency, complete abolition of capital controls, and Argentina’s re-entry onto international capital markets. But the debt backdrop remains precarious with debt owed to the IMF – built up since its first bail out as long ago as 1958 - totaling an eye-watering $40 billion.

The other trade-off involves the hand off from decades of state-backed public investment - cut sharply by Milei as part of attempts to run a balanced budget – and replacing it with international investment. This is a risky pivot at a time when the world economy is becoming more protectionist. Memories of currency and credit risk linger for investors and the challenge for Milei is to keep up the favourable reviews coming his way from international investment banks and multinational bodies. 

Those favourable reviews include something of a bromance with Tesla and Space X CEO, Elon Musk whose nascent America Party in the US is modelled on the type of tax and spending reality checks that Milei is introducing in Argentina. Domestically, Milei’s approval rates are currently tracking higher than his immediate predecessors Alberto Fernandez and Mauricio Macri at the same stage of their Presidencies. This comes despite increasingly fractious protests concerning increases to the state pension which Milei has vetoed, putting him in direct conflict with Argentinian lawmakers in both the Senate and lower chamber of congress.

Turning back to the UK, there will be many who claim events in Argentina hold no useful parallel. The economic malaise that has hampered South America’s second largest economy has gone on much longer than the UK’s own difficulties. This means political and electorate appetite for the tough decisions is likely to be less acute. To duplicate the Argentine experiment in the UK would require public spending decisions far tougher than the Winter Fuel Payment and welfare reforms attempted, and since scrapped, by the Labour government. But here is the thing. Good policymaking is about avoiding the pitfalls emerging, not responding to those you have fallen into. All measures of debt sustainability suggest the UK is on unstable path, with the Office for Budget Responsibility’s long-term projections painting a particularly bleak picture. The Chancellor, Rachel Reeves is finding at almost every turn the limits of her tax levying powers in a mobile, open economy. Her more statist backbench colleagues pine for closed economy theories like new recurring wealth taxes, but all available evidence suggests these do not survive contact with the reality of an open economy.  

So Badenoch and the Conservatives look set embrace Milei and tack back to Thatcherism in carving out an economic alternative. An alternative where, in Argentina, there is an increasingly interesting modern case study. Badenoch’s problem will be if the UK electorate are in any mood to listen.