Piet Viljoen: A rational South African perspective on Argentina’s radical economic experiment

On Sunday, Argentines broke the political mould when 56% of them voted for a Libertarian to become the president of a proud nation with a broken economy. In this honest assessment of new president Javier Milei’s challenges, top SA money manager Piet Viljoen explains how Argentina got to a place where socialism’s decades long spell was finally broken – and the chances of the new leader’s radical economic reforms being achieved. Viljoen also explains the parallels between Argentina and the path his own country is following. He spoke to BizNews editor Alec Hogg.

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Relevant timestamps from the interview

00:08 – Introductions
01:24 – Piet Viljoen on why he’s celebrating what’s happening in Argentina
01:48 – A libertarian
03:12 – Power corrupts
04:17 – Will SA end up where Argentina is
05:20 – The parallels between Argentina and South Africa
07:48 – Pockets of the producers get smaller and smaller
09:34 – Is anybody here paying attention to what’s happening in Argentina
10:42 – Is the Argentina situation likely to repeated in other parts of the world
12:06 – Is there a way of averting the Argentina situation
14:27 – The Libertarians have one throw of the dice
16:42 – How long before we see progress in Argentina
18:06 – Pay attention to the stock markets
19:34 – There’s still a lot to be done in SA
20:12 – Conclusions

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Edited transcript of the Interview between Alec Hogg and Piet Viljoen

Alec Hogg: On Sunday, the Argentinian people decided to appoint a libertarian as the president of the country. His name is Javier Milei. He won 56 percent of the presidential vote. And this is the man who wants to abolish the Reserve Bank, change the Argentinian peso, will replace it with U.S. dollars, cut the state’s share of the economy from 38 percent to 23 percent. And privatise what he can, it’s radical stuff, but Argentina is a country that has stagnated for a long time and is sitting with inflation of 143%. One of the local money managers who has been celebrating what happened in Argentina is Piet Viljoen. Pete is chairman of RECM and manages funds at Merchant West Investments and is a regular, in fact, the only participant at every single one of the BizNews conferences to date. And he’s with us to give us some insights into exactly why he is celebrating what’s happening in Argentina. Pete, you’ve been quite, uh, I wouldn’t say vocal on, on Twitter or X, but you’ve been quite receptive to what’s happened in Argentina.

Piet Viljoen: Yeah, I think it’s fascinating. It’s going to be very interesting to see how this plays out. I think it’s the first time that I know that a truly committed libertarian has been actually voted in by the majority of the population and given a mandate to implement their policies which are very, very different to policies you see from most governments elsewhere in the world.

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Alec Hogg: What’s a libertarian?

Piet Viljoen: Libertarian is basically, I think if you had to go down to the nuts and bolts, at pace, it is somebody who believes in free choice, free individual choice and free markets to determine the allocation of resources in reaction to market prices.

Alec Hogg: So why should this be so strange? Why should it be only now? Because it sounds pretty basic and pretty sensible. We are human beings. We made in the image of our creator, if you believe or don’t believe in God, that’s kind of the big thing. We were brought, we’re in earth to be free, happy, joyous and free, and yet we vote for the opposite it seems.

Piet Viljoen: Yeah. We’re not. Exactly. So I guess it boils down to the old saying that power corrupts and absolute power corrupts absolutely. And what happens is politicians get power, and over time they want more and more power. And the way to maintain that power is to serve certain interests.

…look after themselves while co-opting parts of the population to continue voting them in by effectively providing them with what they say is free, but it ultimately turns out not to be free. Free services, free goods, free all sorts of things, handouts, effectively. And that’s the way they stay in power. And the longer they stay in power, the more power they want because these governments are basically socialist at heart, whether, you know, some of them don’t even call themselves so, as most governments are socialist at heart, and they live off the fat of the land. They don’t create anything. They don’t make anything. They don’t maintain anything.

But they stay in power by giving handouts, and that handouts leads in the extreme to economic situations like you have in Argentina with 140% inflation, currency collapsing every 10 years, debt defaults every 10 years. In the extreme at least that’s about it.

Alec Hogg: How bad is Argentina? And what I’m trying to get to here is South Africa seems to be very happily along this road towards socialism or certainly with the current government. Would we end up one day where Argentina is?

Piet Viljoen: If you give this government free reign 100%, there’s no doubt we would end up where they are. Because as I said, the governing class does not create anything. They live off the entrepreneurial class. And they stay in power by basically drugging the working class, making the working class believe that they’re getting all this free stuff. But at the end of the day, you pay for it through higher inflation and other economic ailments.

Alec Hogg: It was interesting to see some of the tweets of yours and some other people who also have been celebrating the appointment or the Argentinians deciding to go in this direction, saying that there are many parallels with South Africa in what he has been saying. One would assume from what you’ve said now though, that Argentina’s kind of at the end of the road the population have got to a point where it’s so bad, they’ll just about try anything. How far do you think we are from that?

Piet Viljoen: I don’t think we’re that far, although I do think that the ANC government still has this aura around them as a liberation movement which appeals to the large portion of the population, especially the working class, whose conditions have just declined almost consistently since the ANC have gotten into power. But they still vote for them because they have this aura of liberation movement. But as that declines, I think their power declines. Unfortunately, the ANC has also created a large portion of the population that is dependent on social grants and sees that as the ANC handing out things to them instead of the taxpayer. So the messaging is, with ANC so good, we’re doing all these social grants, giving all these things for free, where it’s actually the taxpayer doing it. Just the ANC doing it with taxpayer money.

Alec Hogg: In the latest mini-budget, there’s a document that was released by the Treasury, which shows that there are now 55,000 state employees who earn more than a million rand a year. And if you just put that into the background, and I just want to read from some of the stuff that Javier Milei said in an interview which you tweeted. He said that leftists libertarians like him because they confront politicians, tell them that they’re not the solution, but they’re the problem. Politicians are sociopaths who want us to believe we are mentally invalid in every sense because we cannot live without them. He calls them a bunch of parasites, useless advocates of envy, hatred, theft and unequal treatment under the law, stealing the fruits of someone’s labor and giving it to another.

…just because they feel like it. And then he points to a fact that since 1970, the size of the state in Argentina has tripled and the number of poor people is multiplied by six. And the only people who prospered were politicians. They are like, they’re a cost like monarchs. They multiply, they bring in their relatives, their mistresses, families, and it grows and grows. And the pockets of those who produce get smaller and smaller. Now that’s hectic stuff.

Piet Viljoen: Isn’t that South Africa? I mean, right there, South Africa, the political class is getting bigger and bigger. They produce nothing, create nothing, and maintain nothing. Everything they touch falls apart. The socialist politician class gets bigger, families get bigger, more handouts for them, and the entrepreneurial class gets smaller. One measure is the number of listed companies; it shrinks every year. The working class faces a tougher environment with less growth and fewer jobs as socialist politicians leech from the economy.

Alec Hogg: It sounds very Ayn Rand-ish.

Piet Viljoen: I guess so. Ayn Rand has had a bad rap among left-thinking people, but her message is positive. If you believe in yourself, as a hard worker or entrepreneur, you can look after yourself. You don’t need a government to do that for you.

Alec Hogg: In Atlas Shrugged, she speaks about a ruling class continuously taking from producers. Is there a way of averting the Argentina situation here?

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Piet Viljoen: On the ground, high entrepreneurial talent is leaving South Africa. Those who stay isolate themselves from the government. The working class, who votes for socialist governments, finds it harder to get by. The tipping point happens when the working class realizes socialist politicians are taking from them. Globally, there’s a trend toward socialism, visible in rising debt levels in Western countries. But these governments leave something on the table after taking.

Alec Hogg: With the election coming, is there a way to avert an Argentina-like situation in South Africa?

Piet Viljoen: There’s increasing anger with the government, even among their constituency. The government’s support is eroding as they take from both the entrepreneurial and working classes. The opposition needs to implement policies for growth. The Western Cape shows it can be done, but whether the opposition can replicate this nationwide is an open question.

Alec Hogg: Argentina’s libertarians have a slim chance to succeed. The libertarian project to fix the economy, achieve high growth, and eliminate socialist institutions takes longer than political terms. Socialist governments stay in power by providing short-term feel-good “drugs” to the population, while the long-term economic potential declines. The long-term effects of socialist policies are evident in places like Johannesburg, where the city is collapsing gradually. Socialist governments stay in power by offering short-term benefits.

Alec Hogg: It’s a bit like smoking cigarettes, I guess. You don’t feel it initially, but eventually, it catches you.

Piet Viljoen: It catches you all like heroin. I think it’s more like heroin. It makes you feel great for a while, but it does, it kills you in the end.

Alec Hogg: So when we have a look forward to the likelihood of what happens in Argentina, now there’s the euphoria. It’s a little bit like Ramaphoria here in South Africa. There’s a lot of excitement that we do have a new president there. He’s gonna try a different approach. He’s very outspoken and incredibly emotional and passionate. But the reality has to hit.

The reality of governing a country in a big country like that has to hit some time soon. How long do you think it’s going to be before the world looks at this country and says, it looks like it might be working or on the other hand, what a disaster.

Piet Viljoen: I think you will see more articles and editorials and media attempts at denigrating what he’s trying to do than anything else. So he will face a barrage of opposition from the media because the media is basically part of the governing structures of socialist economies and are fully supported by them.

Alec Hogg: Okay, so don’t pay too much attention to the news flow. Pay attention to what then? The stock markets, because they have celebrated the appointment of this new president.

Piet Viljoen: I think the stock market is a good place to look. We own an Argentinian stock in the Global Value Fund at Merchant West, the Cray suit, which was up 20% last night. So I’m quite happy with that. So I think you can look at the stock market. I think you have to speak to people on the ground there to understand. I think mass media is not something you want to read in any case, and specifically not on a project like the one Argentina is about to embark.

Alec Hogg: Then again, they are the soccer World Cup champions. We are the rugby World Cup champions. So we both, we really good Argentinians and South Africans when we do get our act together and work in the right direction. And perhaps there will be a new path for the world. But I think I hear your skepticism, but there’s a heck of a lot of obstacles to overcome.

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Piet Viljoen: The incumbent socialist governments are very powerful because they have control over the budgets, they have control over the central banks, and they are very powerful as a result. They have control of monetary resources. And for them to lose that control is, that’s all they have. They can’t work, they can’t create anything, they can’t produce anything. That’s all they have. All they have is the ability to leech off other people’s hard work.

And if they lose that ability, the fight back will be intense, because that’s all they have.

Alec Hogg: Not just in Argentina, but South Africa too.

Piet Viljoen: I’m specifically referring to South Africa.

Alec Hogg: Piet Viljoen is the chairman of RECM and manages funds at Merchant West Investments. I’m Alec Hogg from BizNews.com