"Shock therapy" nearly 100 days, Argentina's predicament is difficult to overcome

On December 10, 2023, Argentina's new president Javier Mille took office, and immediately announced in his inaugural performance that he would use "shock therapy" to save the Argentine economy. That's a massive devaluation of the national currency, the peso, by more than 50 percent, to 800 pesos to the dollar, in an effort to stabilize an economy long plagued by inflation and debt.

Why "shock therapy"? "Shock therapy" was originally a medical term that was introduced into the economy 30 or 40 years ago by Jeffrey Sachs, then an economic adviser to the government of Bolivia in the United States. According to the economic crisis in Bolivia at that time, Sachs proposed a set of economic programs and economic policies, the main contents of economic liberalization, economic privatization, economic stabilization, and the implementation of tight financial and fiscal policies. This program is called "shock therapy" because it is so powerful that it has a huge shock to society and even a state of shock.

At the time, "shock therapy" was indeed a great success, and the amazing changes that took place in Bolivia were known to the world as the "Bolivian miracle", and "shock therapy" was also known around the world. However, the successful case of "shock therapy" is only one case, since Russia and Eastern Europe have tried "shock therapy", and they have failed, and even worse for the national economy.

So, nearly 100 days after Javier Milley took office, what is Argentina like after shock therapy?

According to foreign media reports, "shock therapy" has caused severe inflation in Argentina, so serious that medicine has become a new "luxury" for Argentines. According to statistics, since Milley took office, drug prices in Argentina have risen by as much as 254%. Not only medicine, Argentina's daily consumption of water, hamburgers, bus tickets, etc., has also increased several times, which has increased the pressure of ordinary people's lives.

Argentina's "shock therapy", which involves devaluing the currency and cutting spending in an attempt to stabilise the economy, does face difficulties. However, for now, Millay's bold economic reforms have undoubtedly set off a storm in Argentina, and the economic predicament is still difficult to break through.

First of all, the devaluation of the currency leads to soaring prices, which has a huge impact on the lives of ordinary people. The rising price makes the purchasing power of consumers decline and the quality of life is affected. At the same time, it may also lead to increased social discontent and decreased support for the government.

Second, measures to cut spending could have a negative impact on the economy. In the short term, spending cuts may help reduce the government's fiscal deficit, but in the long term, they may restrain economic growth. For example, reductions in public spending could affect infrastructure and the provision of social services, which are critical to long-term economic growth.

In addition, Argentina's "shock therapy" has involved lifting export restrictions and privatizing state-owned enterprises. The implementation of these measures needs to take into account a variety of complex factors, including the domestic and foreign economic environment, political stability, social acceptance, etc. If these factors are not fully considered, the effect of the policy may not be satisfactory.

In general, Argentina's "shock therapy" faces many challenges and dilemmas. The government needs to take all factors into account and formulate more comprehensive and effective economic policies to cope with the current difficulties. At the same time, it is also necessary to strengthen communication and cooperation with all sectors of society, win more support and understanding, and jointly promote the economic development of Argentina.