What do you think about shock therapy? \ stacker news ~libertarian

1609 sats \ 19 comments \ @tomlaies 24 Dec 2023 libertarian

I consider myself very libertarian. I think I'm personally even more extreme than many people I have met in the libertarian space.

However it is very confusing to me why shock therapy in economics is so popular. It's like almost everybod in the libertarian space, many classical conservatives, many neoliberals and most classical liberals and even some centrists/moderates believe in shock therapy.

Again, I'm very libertarian and even more extreme than most libertarian I have met. But I strongly disagree that change has to be fast. If a libertarian is in office there are like 4 years of time to spread the changes.

Why change should be slow (e.g. spread over 4 years of a term)? I don't understand why this is even unclear and not discussed. It takes time to find a new job for individuals. It especially takes time to found new private sector companies etc etc. ALL CHANGES in the economy, even when they are unambigously good, cause disturbance in the short term.

Background

Over the last 3 days Javier Milei  signed into law 300 laws. Yes, you read the right. Three hundred.

1) The total deregulation of the housing market, including the enabling of landlords to charge rent in U$S

2) The derogation of protection for land sale - prior to this, sale of any plots of over 1000ha to foreign capital was forbidden

3) The sale of the complete stock package of national oil, airlines, and other services companies to private funds.

4) One specially peculiar thing was the name of Elon Musk's Starlink as a likely takeover contract for Argentina's national satellite system (ARSAT) 

5) There is also the complete deregulation of the labor market and labor protections. Complete oversight on employee indemnity after firing, with or without a cause

6) More complicated changes that take away branded-medicines advantages over generics

(this list is partly from Radio Graficia, I reformulated it a little to make it shorter)

The source I partly quoted, partly rewrote here is pretty against Milei. I think all of the deregulations here are a good step in the right direction for the economy. Less government, more free markets etc is all good.

Your Opinion

Is there any reason you can think of that fast changes and shock therapy are good? If you are in favor of shock therapy instead of staggered over the next 4 years please convice me why this is better.

I'm literally open to change my mind if someone has a good argument for it

view all related items

430 sats \ 4 replies \ @SpaceHodler 24 Dec 2023

This is the historic speech:

As for your question, Rothbard used to say shock therapy works better, because when the changes are slow, the old tends to creep back in.

I think people need to see the benefits of the changes. If you go slowly, they will not see much and they will think it's not working. Then at the next election they'll vote a collectivist in.

My home country, Poland, owes its successful transformation in the 1990s to the shock therapy applied by the minister of finance Leszek Balcerowicz. He met a lot of opposition too.

10 sats \ 1 reply \ @jk_14 24 Dec 2023

Sure, you will always achieve less than you have planned while fixing economy problems. So you need to make big moves - to stay with something significant still, once the dust settles.

P.S. my tu gadu-gadu po angielsku: #291420 a tu taka niespodzianka ;)

244 sats \ 0 replies \ @SpaceHodler 24 Dec 2023

Good point. Shift your opposition's frame of reference to normalize what you're proposing, so even if half of it passes, both them and you see it as a success.

P.S. zaiste niespodzianka :)

70 sats \ 0 replies \ @SpaceHodler 24 Dec 2023

Btw even the bankers are protesting now.

More specifically, against the privatization of Banco Nación:

0 sats \ 0 replies \ @tomlaies OP 24 Dec 2023

I think people need to see the benefits of the changes. If you go slowly, they will not see much and they will think it's not working.

Can't wait to see the copium from leftists and status-quo-conservatives. Will they admit they were wrong or will they find excuses until forever?

21 sats \ 1 reply \ @kytt 24 Dec 2023

How would someone in a position of power decide when is the right time to finally let something go or enact something else if they chose to do it slowly? No one has a crystal ball for that. Waiting also causes destruction and corruption and could still give advantages to the people in power who know what may be coming down the road via enaction or repeal.

Just rip the band-aid and get it over with.

10 sats \ 0 replies \ @tomlaies OP 24 Dec 2023

How would someone in a position of power decide when is the right time to finally let something go or enact something else if they chose to do it slowly?

That's a good point. I guess the order of thing is also not irrelevant

43 sats \ 0 replies \ @Undisciplined 24 Dec 2023

It's similar to why libertarians tend to favor letting economic bubbles burst over having the government intervene. There are widespread resource misallocations and the sooner they get worked out the sooner resources can be put towards productive uses.

Another argument is that government regulation is immoral and as a matter of justice it needs to be repealed whenever there's an opportunity to do so.

I would also wager that Milei is planning on doing more throughout his term, so it might not even really be "shock therapy". There's a lot of government overreach to undo and even spreading it out over four years would be radically fast change.

1377 sats \ 0 replies \ @ramenbased 24 Dec 2023

the argentine government is very clear on why gradualism wont work and open about its reasoning. the country is on the brink of hyperinflation (16000% Y/Y and 95% poverty are numbers milei carries to the public).

that is the narrative he won a presidntial election with. meaning: if you drive towards a cliff you might want to get the car to stop immediately instead of simply stop accelerating and hope you will stop in time.

gradualism was tried by macri, but what ended up happening is that pretty much all they did was aquire more debt.

therefore, the shock therpary, according to the finance ministry, has a “fiscal anchor”, they argue that the issue isnt the debt per se but the fiscal deficit. if you are a household and you spend more than you make, you probably should immediately stop eating out at 1star restaurants and instead cook cheaply at home.

another shock was the “devaluation” of the peso. exchange controls. the dollar blue (black market rate) was 1:1000 while the official rate was 1:350. the implications of this are too complex to get into, but the when they lowered the official rate to ~800, the dollar blue actually dropped, meaning the peso gained a bit of value. why?

because, and again this is the finance minstries position, its about credibility. a shock therapy sends a clear message: we are serious, we don’t prolong. we know what needs to be done and we do it.

this credibility is extremly important when you think about investments and going back to the table with the IMF and the western world at large.

i can see how many bitcoiners who think they are libertarians are a bit confuaed by all this, one commentator said “global elites”. and milei also turns to OECD and away from BRICS. so keep in mind that fascism and dictatorships historically came to power with a narrative of liberty. and in fact, many bitcoiners arent libertarians even if they say they are. they are fascists (evil global elite (jews), evil US empire blablablabla).

milei is doing what he said he would do in his campaign. milei so far is true to his economic beliefs from the position he is at. the debate of gradualism versus shock therapy was settled by democracy when people voted for milei. they are willing to take a hard hit in the short term, because they want radical, pro market and pro western value change.

0 sats \ 9 replies \ @siggy47 24 Dec 2023

I agree with you generally. Gradual change is more likely to succeed and may prove longer lasting. This doesn't equate to "give Melei time", if that's the thrust of your post. I'm not concerned about him moving slow. I question his underlying motives. His globalist connections and recent appointments are scary. Caputo is an embezzler and a former Macri lackey.

31 sats \ 8 replies \ @tomlaies OP 24 Dec 2023

His globalist connections [...] are scary.

Free market capitalism is inherently global.

If you read Adam Smith he gives a very convincing argument about wine produced in Portugal and machines produced in England. It's better for everybody to drop tariffs between the two countries for economic growth in both countries.

Protectionism and nationalism are inherently anti-free market and pro-big government.

0 sats \ 7 replies \ @siggy47 24 Dec 2023

I meant Klaus globalist, not Adam Smith!:) The WEF aren't a big free market bunch.

43 sats \ 6 replies \ @tomlaies OP 24 Dec 2023

Klaus globalism is good. Free market capitalism should decide where people live and wor. It makes economics more efficient. Everyone should be free like a bird.

Edit: Or let's say it like this: I want freedom to work everywhere on earth where I want. I want to do programming in Singapore or Paris or Texas. And therefore everybody should have this freedom. Let free markets decide not governments.

43 sats \ 2 replies \ @siggy47 24 Dec 2023

My thumb slipped while getting out of my car and I unintentionally zapped your response. It's okay, though, since I agree with everything you wrote below the edit :)

86 sats \ 1 reply \ @tomlaies OP 24 Dec 2023

Alright, here are 43 back. Why 43 tho, just a random number?

21 sats \ 0 replies \ @siggy47 24 Dec 2023

No, you earned them. Why 43? I tend to zap a lot, and many of my stacker friends recognize the amount I zap after a while. So, picking a different default zap is a futile attempt at anonymity. I think I need to change it again.

0 sats \ 2 replies \ @siggy47 24 Dec 2023

"You'll own nothing and you'll be happy" (alternatively "you'll own nothing and be happy") is a phrase originating in a 2016 video by the World Economic Forum (WEF), summarising an essay written by Danish politician Ida Auken. The phrase has been used by critics who accuse the WEF of desiring restrictions on ownership of private property.

I always thought private property was a pretty fundamental tenet of free market capitalism. Libertarians are fond of the concept also.

43 sats \ 1 reply \ @tomlaies OP 24 Dec 2023

Ok, I'm not pro-taking-away-peoples-property. Like, obviously.

I just think the general direction of more economic freedom and less government restrictions is good.

This encompass literally everything. Wine from Portugal but also cheap labor from Mexico. But also I want the freedom to rent a Tesla for a day - freedom to rent it or buy it however I wish.

22 sats \ 0 replies \ @siggy47 24 Dec 2023

I agree with your gradualism idea. I don't trust Melei, but maybe he'll prove me wrong. At least I can't see him making matters worse in Argentina, so that's good, I guess.