One of my favorite songs when I was a teenager in the late 1960s was “Harper Valley PTA.” In it, Jeannie C. Riley sings about a woman whom the Harper Valley PTA criticizes for the way she dresses. The woman doesn’t sit back. Instead, she shows up at the PTA meeting that afternoon and asks some embarrassing questions designed to show the hypocrisy of many of the members of the PTA.
I thought of this song when watching Argentine president Javier Milei’s masterful speech last month to the World Economic Forum in Davos, Switzerland. The WEF meets every January in Davos to discuss world affairs. Based on reports I’ve read over the years, it’s fair to say that while WEF participants seem to favor some good policies such as freer trade, they also want to arrange people’s lives. This shows up especially on the issue of fossil fuels. In 2020, for example, law professor William Burke-White expressed his hope that “teenage climate activist Greta Thunberg” is an opinion setter and celebrated the fact that a few “CEOs and government ministers joined youth from around the world in Greta’s climate march down the main street of Davos.” I wonder if only a few CEOs showed up because they hadn’t parked their companies’ private jets in time. (If you think I’m not taking global warming seriously enough, realize that even the UN Intergovernmental Panel on Climate Change agrees with me. As former Caltech physicist Steven E. Koonin pointed out in his 2021 book, Unsettled, the IPCC predicted that if the global temperature increases by up to 3 degrees Celsius in 2100, world gross domestic product will be 3 percent lower than it would have been. As I wrote in 2022, “So instead of world output in 2100 being 387.5 percent higher than it is now, it would be ‘only’ 368.8 percent higher.”)
The WEF was due for a “Harper Valley PTA” moment, and Javier Milei delivered it masterfully.
Milei’s economic message
I wrote earlier on this site about Milei’s deep economic understanding. Now, as then, I make no claims that, with a small number of seats in Argentina’s legislature, Milei will make huge progress on economic policy. But he may well succeed in shifting the terms of the economic debate. It’s quite understandable that he attended the Harper Valley PTA, oops, the World Economic Forum, to give his side of things.
Whereas Mrs. Johnson, in the Harper Valley PTA song, focused entirely on specific actions of particular members of the PTA to show their hypocrisy, Milei had bigger fish to fry. He argued that socialism makes us poor, and he made the case for a much freer world economy. What could be more appropriate than making that case at the annual meeting of an organization with the name World Economic Forum?
His whole 24-minute speech is worth listening to in translation or worth reading. Early in the speech, he focused on what economists often call, and economist Milei calls, the “hockey stick” of economic growth. While most economists take this for granted, they often fail to mention it to people who don’t know it. Milei succeeded:
If we look at the history of economic progress, we can see how between the year zero and the year 1800 approximately, world per capita GDP practically remained constant throughout the whole reference period.
If you look at a graph of the evolution of economic growth throughout the history of humanity, you would see a hockey stick graph, an exponential function that remained constant for 90 per cent of the time and which was exponentially triggered starting in the nineteenth century.
He also noted that economic growth over two centuries slashed the amount of poverty in the world, something that, presumably, WEF chairman Klaus Schwab and other WEF participants should care about. He stated:
[W]hen you look at per capita GDP since the year 1800 until today, what you will see is that after the Industrial Revolution, global per capita GDP multiplied by over fifteen times, which meant a boom in growth that lifted 90 percent of the global population out of poverty.
We should remember that by the year 1800, about 95 percent of the world’s population lived in extreme poverty. And that figure dropped to 5 percent by the year 2020, prior to the pandemic. The conclusion is obvious.
Extreme poverty, the World Bank stated in October 2023, refers to someone living on less than $2.15 per day.
In 2019, before governments around the world reacted to COVID-19 by shutting down huge parts of commerce and travel, the number of people in extreme poverty was about 650 million, out of a world population of 7.8 billion. That’s 8.3 percent, higher than Milei’s 5 percent, but close.
Throughout his speech, Milei emphasized the importance of economic freedom in causing these results and the role of socialist policies in keeping people poor or throwing them into poverty. His facts about economic freedom and socialism are not controversial. If you doubt that, compare two situations that are as close as we can find to a laboratory experiment: North versus South Korea and East versus West Germany.
Here’s what I wrote in “The Two Koreas and the Two Germanies: Close to a Laboratory Experiment” in David R. Henderson, ed. The Concise Encyclopedia of Economics:
At the end of the Korean War in 1953, both North and South Korea were decimated. Both have harsh climates, and both initially had similar cultures. There was one big difference: North Koreans lived under communism and still do, while South Koreans lived under a government that allowed property rights; was relatively open to trade; and, although it rigged the rules in favor of large corporations, was relatively open to entrepreneurship. In short, there was much more economic freedom in South Korea than in North Korea. The results are in. In 2004, North Korea’s GDP was about $40 billion, up from $11 billion in 1953 (also in 2004 dollars). This implies an average annual growth rate of 2.6 percent, which is almost certainly an overstatement of the true North Korean growth rate because there is no good way to measure the value of output in a socialist economy. If shoes are produced but no one buys them, this counts in GDP. If one government plant produces steel that other government plants are required to take, even if it is useless, this also counts in GDP. Such surpluses of useless goods are endemic in socialist economies (see socialism). Also, the socialist planners had an incentive to overstate growth. In 2004, South Korea’s GDP was about $925 billion, up from about $13.8 billion in 1953 (also in 2004 dollars). This implies an average annual growth rate of 8.6 percent, more than three times as much as North Korea’s official rate.
Similarly, at the end of World War II, both East and West Germany lay in ruins. But in 1948 (see German economic miracle), West Germany slashed tax rates and ended price controls, moving from a fascist economy (see fascism) to a relatively free economy. East Germany, by contrast, adopted communism and did not abandon it until 1991. The results are just as stunning as in the case of the two Koreas. In 1991, East Germany’s GDP (in 1990 dollars) was $86 billion, up from $51.4 billion in 1950 (also in 1990 dollars). This implies an average annual growth rate of 1.3 percent. For the same reasons as in the case of North Korea, this also is likely an overstatement. In 1991, West Germany’s GDP (in 1990 dollars) was $1.24 trillion, making it the third-largest economy in the world, up from $214 billion in 1950 (also in 1990 dollars). This implies an average annual growth rate of 4.4 percent, more than three times that of East Germany.
To see the Korea story in one picture, take a look at North and South Korea at night.
Back to Milei: he gave the WEF a message that it badly needed to hear. I would have loved to see a camera pan over the audience as he made his pitch. Unfortunately, the camera aimed at him the whole time.
“Do not be intimidated”
Milei slipped into Mrs. Johnson mode (she was the outspoken woman in the Harper Valley song) in two ways. First, he denounced social justice, arguing that it’s not just. He stated that social justice is “an intrinsically unfair idea because it’s violent. It’s unjust because the state is financed through tax and taxes are collected coercively. Or can any one of us say that we voluntarily pay taxes? This means that the state is financed through coercion and that the higher the tax burden, the higher the coercion and the lower the freedom.”
Second, he defended business people who are trying to make a profit. Klaus Schwab, in a talk on the WEF site, took great pride in having introduced the term “stakeholders” in 1970. The term, he noted, refers to people who have an interest in a business’s behavior and future but don’t actually own any of it. Milei stated clearly the case for corporations to stick to their business and work for their owners. Along the way, he took a swing at those who want corporations to give in to “stakeholders.” It was like Adam Smith in The Wealth of Nations, with a little Ayn Rand thrown in. The whole section is worth reading or listening to. Here’s my favorite section:
Therefore, in conclusion, I would like to leave a message for all business people here and those who are not here in person but are following from around the world.
Do not be intimidated by the political caste or by parasites who live off the state. Do not surrender to a political class that only wants to stay in power and retain its privileges. You are social benefactors. You are heroes. You are the creators of the most extraordinary period of prosperity we’ve ever seen.
Let no one tell you that your ambition is immoral. If you make money, it’s because you offer a better product at a better price, thereby contributing to general wellbeing.
Do not surrender 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 rest assured that as from today, Argentina is your staunch and unconditional ally.
That shout out to businesspeople might have been one of the most important parts of his speech. People who run corporations are often targeted for not being good corporate citizens, which seems to mean, in practice, not doing what the targeters want. It’s possible that business people around the world who listened to Milei’s speech felt some moral support.
I do have one main critique of Milei’s speech. He stated, “There are no market failures.” Unfortunately, there are. That does not mean that the government will do better. But there are market failures. I challenge anyone to tell me how lead would have been taken out of gasoline in a purely free market.
Nevertheless, Javier did a great job of presenting his pro-freedom message at a forum that often dishes out anti-freedom ones. As Milei says at the end of his talks, “Long live freedom, dammit.”
