On paper, the numbers look astonishing. The annual rate of inflation in Argentina has plummeted from 211% in 2023 to 31.5% by the end of 2025.
President Javier Milei is taking plenty of credit for the drop. And he spent some time on Wall Street last month, pitching his “chainsaw” approach to public spending as a triumph against inflation.
But as a political economist who has tracked the cyclical history of economic crisis in Argentina, I see a much grimmer story unfolding.
For the drop in inflation is certainly not a victory for Argentine productivity. It’s a byproduct of a deliberate and engineered collapse in people’s wages.
Milei hasn’t fixed the engine of Argentina’s economy, he has simply turned it off. Since he took office in 2023, the country’s manufacturing output has dropped dramatically, with over 2,000 businesses shutting down and 73,000 jobs lost.
In the automotive sector, factories are operating at just 24% of capacity.
These aren’t just dry statistics. Real wages have been crushed so hard that demand for Argentine goods has evaporated. If a manufacturer is only using a third of its machinery because nobody can afford their goods, they lose their ability to put up prices, and inflation rates stop rising.
By drastically reducing demand, Milei has not solved the inflation puzzle. He has simply removed some of the pieces, by making the population too poor to participate in the Argentine economy.
On top of this, the fear of mass unemployment means workers have no choice but to accept an ever smaller share of the nation’s economic pie. Again, low wages serve to prevent the upward spiral of prices.
So the supposed victory over inflation is actually the institutionalisation of lower wages and a lower standard of living for most people.
A recently passed law (officially named “labour modernisation”) reinforces this new reality. It has effectively increased many workers’ hours and reduced their protections, making labour both cheaper and more disposable.
The new legislation has been criticised as a return to working practices of the 19th century. Far from modernising work, it is about normalising a lower wage share of GDP and ensuring that the shrinking slice of the national income for the Argentine worker isn’t just a temporary emergency, but a permanent feature of the model.
And while the government highlights 4% GDP growth forecasts for 2026, that growth is focused in sectors like agriculture, mining and lithium, which create very few jobs. For the average urban worker the economy hasn’t recovered – it has simply bottomed out at a new, lower standard of living.
Wages down, inflation down
That doesn’t mean that the drop in inflation counts for nothing. There has been a genuine sense of relief after the triple-digit chaos of 2023.
The simple ability to shop at a supermarket without the price of goods changing dramatically in days will mark a deep psychological shift for many Argentinians.
But that shift is not based on solid ground. Inflation hasn’t been tamed by a more efficient economy – it has been starved into submission.
Yet remarkably, Milei’s “miracle” is already being packaged for export. From the radical fiscal cuts proposed by Trump in the US to the nationalist platforms of Orbán in Hungary and the Vox party in Spain, Milei and his model are being touted as a blueprint for other economies struggling with inflation.
EPA/Juan Ignacio Roncoroni
But what looks like a triumph to some is, in reality, a deepening social crisis. Milei’s Argentina is not a blueprint to be followed. It is a warning of what happens when the cure for inflation is more lethal than the disease itself.
For this level of wage suppression is a stark reminder of Argentina’s economic crisis of 2001, a period of total state failure, sovereign default, bank freezes and 20% unemployment that left a permanent scar on the national psyche.
To have surpassed that level of wage suppression today is a damning indictment of Milei’s approach. But while 2001 was a sudden collapse of a monetary system, the 2026 reality is a slow, institutionalised asphyxiation.
The question for the coming years is how such a model can possibly be sustained. Milei has left the country with no economic levers to pull for a genuine recovery.
With negative net reserves, a domestic market in ruins, and multi-billion dollar IMF and private debts hanging over the country, the government’s path is now dictated entirely by a desperate need for dollars that turns every domestic policy into a plea for foreign capital.
This has created an economic vacuum in which there is no credit for small businesses, no surplus for public investment and no consumer demand to entice private capital back into the real economy.
That is why the administration’s pitch to New York investors in March was essentially a desperate plea for capital to fill this void. But Wall Street is not generally in the business of building factories or creating jobs in Argentina.
If anything, its investors will be looking for easy short-term profits in a newly deregulated market. And what emerges then is an economically divided Argentina. On one side of this will be a thriving enclave of mining and agribusiness designed for the global market, and on the other, a vast urban industrial wasteland where millions of Argentinians struggle desperately to make ends meet.
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