Economic world order requires disruptions for growth and progress

The United States has witnessed a significant shift in economic policy with the successful passage of the "One Big, Beautiful Bill" by the Trump administration last week. This legislation aims to address government spending and taxes, marking a departure from the accumulation of debt through subsidies.

Meanwhile, Argentina, once a wealthy nation, has been grappling with widespread insolvency and high poverty rates due to decades of socialist policies. However, recent developments suggest a turnaround. Inflation in Argentina is declining, the economy is showing signs of sustained growth, and the budget is now balanced. The poverty rate has fallen to 30 percent and is projected to decrease further.

Empirical evidence supports the notion that market-driven economies are less prone to resource misallocation than planned economies. Argentina's economic recovery can be attributed to the sweeping reforms implemented by the Milei administration, which has reduced laws and regulations.

On the global stage, many economies are mired in a state of malaise, characterised by high public debt levels and persistent use of flawed policies. The Milei administration's success in Argentina could inspire a shift in European economic policy. Such a policy would likely emphasise a strong reform and investment package, combining public and private investments, reforms in labour markets, and deregulation to stimulate growth.

However, it is crucial to balance the structural sustainability of public finances and avoid excessive debt risks. This approach mirrors the reforms and investment-focused fiscal frameworks that Germany and the EU are currently pursuing.

It's important to note that some policymakers resort to hiding debt under various labels or shifting it to less accountable supranational levels. Moreover, many policymakers are fixated on squeezing every last penny from citizens and businesses through arbitrary tax policies, which can frustrate genuine reform efforts.

The Modern Monetary Theory, which claims governments can incur unlimited debt, has been developed by compliant economists, but its validity is highly questionable. A balanced approach, as demonstrated by the Milei administration and the ongoing reforms in Europe, seems to be the key to economic prosperity.