Andrés Malamud: ‘Milei’s bet on the United States is crazy, but not stupid’

Andrés Malamud graduated in Political Science from the University of Buenos Aires and has a doctorate in Social and Political Sciences from the   European University Institute. He is currently chief researcher at the University of Lisbon. He has authored and co-authored several books and numerous academic articles.

In an interview, Malamud argues that President Javier Milei’s “bet on the United States is highly risky,” adding that “if it works out, it’s the goal of the century.” He explained, nevertheless, that “a bet is neither correct nor incorrect, it’s a high-risk bet which has its chances of coming off.”

"It’s unclear if Argentina is being invited today but it has an opportunity like it hasn’t had in a century," Malamud told Modo Fontevecchia, broadcast on Net TV and Radio Perfil (AM 1190).

Andrés, you have mentioned previously the possibility of Argentina finding itself in a similar stage to certain countries which grew driven by the support of the United States after World War II. What would that type of development really imply for Argentina today? Would it be an opportunity such as what Germany, Japan and South Korea (which grew enormously with US aid) had or could it, on the contrary, lead to a more dependent or subordinate relationship, as is the case of Puerto Rico?

Let’s zoom out to understand the concept before knowing how it applies to Argentina. There are around 200 countries in the world and only 40 are developed. How did they develop? That is the question. Some people say: “It’s all about the climate.” If you live in a hot climate, you get malaria and mosquitoes so you die before you can invest; if you live in the cold, all that’s left to you is to innovate so that the climate is determinant. We know that it might have been like that originally but in reality civilisation was born in Mesopotamia so that heat might also go with development. So some say: “It’s all about public policies” – if you open up and permit free trade, private property and a policy of trading with the world like South Korea and several other countries, the Europeans, for example, and the United States before (Donald) Trump. And afterwards came last year’s Nobel Prizes who say: “No, it’s not only the climate, it’s not just the policies, it’s the institutions.”

Policies are the style of play – you can Carlos Bilardo or César Menotti. The institutions are the rules of the game. In football only the goalie can grab the ball with his hand. Those people are saying: “The rules of the game are more important than the style of the game.”

And what I’m suggesting to you is that they all fall short. Because if you look at the 40 developed countries, you will find them somewhat geographically contiguous in the northwestern quarter of the world: North America and Europe, mainly western, and then Asia Pacific. And what those countries have in common is that there were some pioneers who fundamentally influenced the development of the others. The great pioneer: Britain with a series of technological innovations like the spinning jenny, the steam engine and barbed wire fencing to defend private property of cattle. They extracted from their colonies, of course, but the colonies belonged to Britain.

Why do they invite the development of great powers? Out of self-interest. Here in Argentina, we tend to think that when any invitation arrives, it is out of Good Samaritan charity. The Marshall Plan benefitted the United States enormously, constructing a peaceful global system within which they prospered, although Trump is complaining now. They had markets, they had inputs, they had allies. The invitation arrived out of self- interest. 

It’s unclear if Argentina is being invited today but it has an opportunity like it hasn’t had in a century. Because since 1930, when we fell off the map where we are the guests of Great Britain, we tried to re-enter with the Roca-Runciman Pact [in 1933] and it was not enough. In 1930 the world broke down into financial crisis and Britain defined its imperial preferences.
 

There is an idea of the inevitability of the Thucydides trap, of a military war between the United States and China, because sooner or latter the emerging empire threatens the existing empire and attacks, like Sparta did against Athens. Do you consider that plausible in the 21st century?

Yes. And studied, luckily. Graham Allison, a US international scholar, has written a book about the Thucydides trap. Thucydides said that the trap is that an ascending power scares an existing power so that things go out of hand. And what Alllison shows is that since Athens and Sparta there have been 16 transitions of hegemony, of which 12 were via war but four not. And those four are the most recent – the United States versus the Soviet Union, the two greatest nuclear powers in history, but the Cold War ended without a shot being fired between them; the transition between Britain and the United States, for example; and closer to us culturally between Spain and Portugal, the Treaty of Tordesillas. The two great powers which divided the world between themselves did not go to war with each other, they went to war in the River Plate but not in the Iberian Peninsula. So the Thucydides trap does exist in the sense that there is rivalry between those arriving and those established but 25 percent of the historic cases ended without war.

And all those in recent centuries. What history shows is that they seem to have learned that both lose in a war and finally end up seeking a way of negotiation.

That is the optimistic vision of the human being, which I partially share: that there is a learning process. The pessimistic vision, which also works, is the mutual fear of the nuclear threat. If I kill you, you kill me. We both die together, it’s not worth it.

And now, Argentina. From what you said at the beginning, I would understand that Milei’s bet seems correct to you.

A bet is neither correct nor incorrect. If you bet everything on the red, you can win or lose. And when you win, we’ll say it was a correct bet but it is a risk with a chance of working out. [Juan Domingo] Perón was also a high-risk gambler who bet on a third world war. He thought it was inevitable, coming close in Korea where [Douglas] MacArthur wanted to use nuclear weapons but it did not happen. His decision was that if there was war, keep your distance with self-sufficiency, which would pay off. Milei’s bet is highly risky. If it comes off, it is the goal of the year. It is difficult to measure the probability but it is possible.

Perhaps the word “correct” in a betting sense seems a bit exaggerated. If you have to choose between white or red, one might say that what is correct is what supposedly has more possibilities within a degree of uncertainty. If you were obliged to choose between aligning with the United States or turning to multilateralism and giving priority to the relationship with Asia and China, what would you do?

I’m averse to risk. I try not to take risky decisions on principle, then afterwards I do crazy things. But I would have gone for Asia. The multilateral institutions do not work any more but you’d have millions of friends. And Asia is the obvious, risk-free bet: 60 percent of humanity, China and India almost 40 percent together. China maintains a five percent growth rate, I feel that to be tragic because it’s low. India will possibly come to grow at those rates in the future although its population is also increasing so that it will not become rich so quickly. Vietnam, a really poor country, has 100 million people who will consume more proteins. Indonesia has almost 300 million inhabitants. All the poker chips were on Asia.  Milei’s bet is crazy but not stupid. It stands a chance – it’s a high-risk bet. Mine would have been conventional.

Let’s turn to the economy. The United States emerged from World War II with the dollar almost the monetary standard because it was left with 80 percent of the world’s gold reserves. There was thus finally no way in which the central banks were going to have their reserves in gold – the only alternative was to pick the reserves of somebody who had all the gold. The dollar somehow functioned as a sort of convertibility with those who had all the gold until Richard Nixon abandoned the gold standard. Could it be said that if a currency dominates the world more than nuclear weapons, that currency finally becomes what we might call the world language? And that the issue is the dollar and that China has no possibilities of substituting the United States as the biggest world financial power?

And Yuval Noah Harari has this explanation of civilisation as a product of the imagination. We imagine things which do not exist, we invent them and that permits us not to stab anonymous persons in the middle of the street out of fear. And among these inventions, he speaks of religion and money. And he says that money is much more important because you can be agnostic and live without religion but you cannot live without money so that even if you do not believe in it, you have no choice but to accept it. And the money god today is the dollar, above all. It seems that China still does not have either the capacity or the ambition to substitute the dollar. Its biggest reserves are in dollars, although gradually declining in recent years, and this is the ironic novelty of these times: China, as the emerging power, is also the satisfied power because it emerged with this system. China is the player coming from below who does not want to change the rules. The United States created those rules, is on top and says that those rules hurt them. We had never seen anything like this – that the dominant power should be the dissatisfied revisionist. But China is content to leave things as they are because with this system they arrived to where they are now and with this system it will keep advancing. The one attacking, questioning, defying and breaking up the system is the dominating United States.

I hear you and the idea of [Ferdinand de] Saussure of the significant and the signified comes to mind: that the currency is finally a significant language. So I say: well, if the dollar is said to be the world currency for the next several decades and Argentina is a country with chronic financial problems, an alliance with the United States would seem inevitable. I say: Isn’t the issue of money crucial for a country like Argentina lacking its own currency at the same time?

What determines the bimonetary condition of the Argentine economy is that fiscal surplus is not enough. When the government wanted to make us believe that this time is different because there was a fiscal surplus, that was not true because Argentina has two currencies: one whose printing can be limited while the other does not depend on it. So what happens with the  dollar? It has an extremely heavy impact on us but also on Europe and China. In that aspect, those who spoke of dollarising thought that we were resolving the problem of lacking a currency. But in reality, if you dollarise, the currency is not yours and your economic cycle is not synchronised with your monetary policy. Europe is different – it has problems of coordination but the 20 countries sharing the euro participate in fixing its value. They have a member on the European Central Bank board of directors in Frankfurt. Panama, El Salvador and Ecuador don’t have that and nor would Argentina. That would equivalent to an imposed currency. It wouldn’t be your currency because you would not participate in the definition of monetary policy.