Javier Milei, Argentina and the Dollar

Following his surprise win in Argentina’s Aug. 13 presidential primary, Javier Milei was in the international spotlight discussing an unusual topic for a rock-star politician: monetary policy. But that’s because he is an economist by profession and an unusual one at that.

Mr. Milei is a proud follower of the Austrian school of economics, which is skeptical of central banking and views it as the cause of inflation and the business cycle. That augurs well for a country with a history of fiscal mismanagement, corruption, uncontrolled inflation and a disastrous default.

For Mr. Milei, economics is a lively debate about political philosophy and ethics. His view is that when a central bank prints more money, it devalues existing money, which constitutes a form of theft by an unelected branch of government. It is hard to argue with that logic, especially in such a country as Argentina, where inflation tops 116%, eroding the purchasing power of average citizens in favor of those who first receive newly printed money.

Mr. Milei has promised to close the central bank and dollarize the economy—a process that would essentially outsource the country’s monetary policy to the Federal Reserve. These are excellent proposals and my recent co-authored research in the Journal of Financial Stability and Brown Journal of World Affairs demonstrates the economic gains that can be had for a country that chooses to forgo its monetary prerogative.

Currency competition, especially through liberalizing legal-tender laws, restrains the inflationary impulses of a central bank. If foreign currencies are able to be used and not taxed or regulated disfavorably, then the central bank will have less power to inflate because of consumer choice.

A country’s commitment to a fixed monetary policy signals to both foreign and domestic investors that the country is open for business. Investment and business activity will flourish, as the specter of hyperinflation and nationalization will no longer hang over financial decisions.

Argentina used to be one of the most developed and wealthiest countries in the world, but a century of state intervention in the economy has shown how dangerous it is to disrupt the normal functioning of markets. Even a selfish government that’s keen on reaping increased tax revenue from growth should have an interest in making a commitment to monetary liberalization.

Mr. Milei has named each of his five dogs after economists, including Murray (Rothbard) and Milton (Friedman). These eccentric choices may make good headlines, but they reveal something deeper: a commitment to buck trends and business as usual. In a country such as Argentina, that is welcome news.

Mr. Raskin is director of research at Qvidtvm Inc. and an adjunct professor at New York University School of Law.