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The guest commentary below was written by written by Daniel Lacalle. This piece does not necessarily reflect the opinions of Hedgeye. Want more global macro insights from Lacalle? Tune in at 2pm ET today (January 23) for a Real Conversation webcast with Keith McCullough. |
Big corporations and global leaders adhere to and assume the growing interventionism and the advance of socialism because, for politicians, it is an excellent way of perpetuating their power and control over citizens, while multinationals tolerate it because they have enough financial muscle and size to absorb the pernicious effects of the massive rise in public debt and monetary imbalances, public spending, taxes, barriers to trade and progress.
They all know that the burden of interventionism falls entirely on small businesses and families, destroying the middle class in the process. The wealthy can escape the negative impact of monetary debasement and confiscatory taxes. People with salaries and small entrepreneurs cannot.
Who suffers the constant erosion of real disposable income from those gigantic and wrongly called government “stimulus plans” that never stimulate anything but bureaucracy, leaving a massive trail of debt and impoverishment caused by increased inflation and ever-increasing taxes? The middle classes and small businesses.
Why do global leaders accept a rising trend in destructive policies that they know will fail? There is a perverse incentive. Business leaders who should value the success of productive investment and free markets are afraid that the interventionist cancelling crowd will attack them and, therefore, prefer to look elsewhere or even finance the advance of anti-freedom ideas in the hope that the mob will let them work and invest in peace. Others believe they may keep their market share and avoid the threat of competition if they stay close to political powers. It doesn’t work. They do not leave them alone, and leaders lose more than they gain when they fall for cronyism. Whitewashing Marxist collectivism does not stop it. It is no surprise to see how this neocommunism disguised as social justice attacks with even greater cruelty those companies and leaders who embrace their false messages. Just like wokeism often cancels and destroys its most staunch defenders, Neomarxism does the same with corporations and business owners because its objective is full control.
Javier Milei explained this in detail at Davos, crushing the consensus narrative. “It should never be forgotten that socialism is always and everywhere an impoverishing phenomenon that has failed in all countries where it’s been tried out. It’s been a failure economically, socially, and culturally, and it has also murdered over 100 million human beings, he said. However, the most important point of his speech for me is to remind people what socialism is.
“I know, to many, it may sound ridiculous to suggest that the West has turned to socialism, but it’s only ridiculous if you limit yourself to the traditional economic definition of socialism, which says that it’s an economic system where the state owns the means of production. This definition, in my view, should be updated considering current circumstances. Today, states don’t need to directly control the means of production to control every aspect of the lives of individuals. With tools such as printing money, debt, subsidies, controlling the interest rate, price controls, and regulations to correct so-called market failures, they can control the lives and fates of millions of individuals. This is how we come to the point where, by using different names or guises, a good deal of the generally accepted ideologies in most Western countries are collectivist variants, whether they proclaim to be openly communist, fascist, socialist, social democrats, national socialists, Christian democrats, neo-Keynesians, progressives, populists, nationalists, or globalists. Ultimately, there are no major differences. They all say that the state should steer all aspects of the lives of individuals. They all defend a model contrary to the one that led humanity to the most spectacular progress in its history.”
This is critical because the average citizen has been led to believe that massive money printing, piles of new regulations and laws, rising public debt, and constant interest rate interventions are capitalist or neoliberal policies, when they are tools of statism to accelerate the rising size of government in the economy.
Socialism does not seek progress; it seeks control. Large companies that fall into the trap of buying socialism suffer the same attack and further deteriorate their ability to create value and wealth.
Milei destroyed all the current myths in one speech at Davos, and millions watched in awe because it was obvious that he was telling the truth. And that, coming from Argentina, he knows what he is talking about. When one speaks with Argentine citizens, they often remind us all that they “come from the future.”
The example of Argentina is obvious. Between 2007 and December 2023, the world looked to the other side in the face of a massive increase in poverty and inflation. They even had the audacity to justify that inflation was due to exogenous factors, not massive money printing, and that poverty was miscalculated, exculpating socialist governments from any responsibility.
The left’s shocking silence in the face of the humanitarian and ecological disasters created by the Socialism of the XXI Century governments in Venezuela, Nicaragua, Argentina and other countries shows that they could not care less about the welfare of citizens or the protection of the environment but used seemingly harmless causes to take power and destroy the economy. Why? Because the goal of any socialist leader is to create poor hostage clients who depend on a state in which those leaders become obscenely rich as the country goes down. Do not be mistaken; statism does not seek the redistribution of wealth from the rich to the poor, but the accumulation of the wealth of the nation in the hands of a few politicians.
Thankfully, Davos Milei was an undeniable success, and this shows that not all is lost. According to the World Economic Forum page, 10 times more people watched his speech than all other leaders combined. Socialist leaders like Spain’s Sanchez bombed with less than 5,000 views. No, businesses do not depend on the state. There is no welfare state without powerful and productive enterprises, and there are no public services if private wealth is not created. There is no public sector without a thriving private sector. Progress does not depend on a crony, extractive, and confiscatory state but on a strong civil society of free individuals with independent institutions that act as a counterweight to political power. Legal certainty and investor attractiveness, or respect for international law, do not happen due to the generosity of political leaders, but thanks to free markets and independent institutions that limit political power. The world does not progress due to big governments, but despite the obstacles they put in place,
Milei crushed it by telling the truth. Those who remained silent for years about Argentina’s economic ruin now fear him.
Socialism is an impoverishing system that has failed and should not be defended out of fear of retaliation.
Milei reminded companies that they are the heroes of poverty reduction and progress and that the left only uses environmental and gender excuses to impose totalitarianism.
Milei reminded everyone at Davos that Argentina’s ruin is not a coincidence or a fatality, but the result of years of implementing the same interventionist policies that many at Davos have defended or tolerated.
ABOUT DANIEL LACALLEThis is a Hedgeye guest contributor piece written by Daniel Lacalle and reposted from his website. Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap." Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Bloomberg, CNN, Hedgeye, Epoch Times, Mises Institute, BBN Times, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE. View all posts by Lacalle on his website. Twitter handle: @dlacalle_IA LinkedIn: Daniel Lacalle |
