Argentina’s Javier Milei’s “Miracle” is a warning to the world, not a blueprint.

On paper, the numbers look amazing. The annual inflation rate in Argentina has decreased from 211% in 2023 to 31.5% by the end of 2025.

President Javier Milei takes much of the credit for the decline. And he spent time on Wall Street last month, pitching his “chainsaw” approach to public spending as a victory against inflation.

But as a political economist who has followed the history of Argentina’s economic crisis, I see a tragic story unfolding.

For deflation is certainly not a victory for the production of Argentina. It is a product of the willful collapse of people’s incomes.

Milei has not fixed the engine of the Argentine economy, he just turned it off. Since he took office in 2023, the country’s productivity has fallen significantly, and more than 2,000 businesses have been closed and 73,000 jobs have been lost.

In the automotive sector, factories operate with only 24% of energy.

These are not just dry statistics. Real wages have been squeezed so hard that demand for Argentine goods has evaporated. If a producer uses only a third of his machinery because no one can afford to buy his goods, they lose their power to raise prices, and prices stop rising.

By reducing demand significantly, Milei has not solved the problem of inflation. He simply removed some of the pieces, making the citizens too poor to contribute to Argentina’s economy.

On top of this, the fear of mass unemployment means that workers have no choice but to accept a smaller share of the country’s economy. Also, low wages help prevent inflation.

So what is supposed to be a victory over inflation is actually the setting of lower wages and lower living standards for many people.

A recently passed law (called “labour modernisation”) confirms this new reality. It has effectively increased workers’ hours and reduced their safety, making labor cheaper and more disposable.

The new law has been criticized as a return to 19th century practices. Rather than renewing modern work, it is about making a lower share of GDP wages and ensuring that the falling rate of national income for the Argentine worker is not a temporary emergency, but a permanent feature of the model.

And while the government has highlighted a 4% GDP growth forecast for 2026, that growth is focused on sectors such as agriculture, mining and lithium, which generate very few jobs. For urban workers, the economy has not improved – it has sunk to a new, lower standard of living.

Wages are down, inflation is down

That is not to say that deflation is useless. There was a real sense of relief after the triple digit upset of 2023.

The simple ability to shop in a supermarket without the price of goods fluctuating dramatically over the days will mark a profound psychological shift for many Argentines.

But that change is not based on a solid foundation. Inflation has not been controlled by a more prosperous economy – it has been starved.

However, surprisingly, Milei’s “miracle” has already been packed for export. From the drastic reduction of funds introduced by Trump in the United States to the nationalist platform of Orbán in Hungary and the Vox party in Spain, Milei and his model are being considered as a blueprint for an alternative economy that fights inflation.

But what looks like a victory to some is, in fact, a growing social crisis. Milei’s Argentina is not a plan to follow. It is a warning of what happens when the cure for inflation is more dangerous than death itself.

For this level of wage pressure is a strong reminder of the Argentinean economic crisis of 2001, a period of complete failure of the government, privatization, bank freezes and 20% unemployment that left a permanent scar on the country’s psyche.

Exceeding that level of wage pressure today is a damning indictment of Miley’s style. But while 2001 was a sudden collapse of the financial system, the reality of 2026 is a slow, systematic collapse.

The question for the coming years is how such a model can be sustained. Milei left the country with no economic means to truly recover.

With bad assets, the domestic market in ruins, and the IMF with billions of dollars and private debts hanging over the country, the government’s path is now completely dictated by the strong demand for dollars that turns every domestic policy into a call for foreign capital.

This has resulted in an economic slowdown where there is no credit for small businesses, not much money for public investment and no consumer demand to attract private capital back into the real economy.

That’s why the administration’s message to investors in New York in March was really a strong appeal for money to fill this gap. But Wall Street is usually not in the business of building factories or creating jobs in Argentina.

If anything, its investors will be looking for easy short-term gains in the recently wiped out market. And what emerges then is an economically divided Argentina. On the one hand, it will be a thriving mining and agribusiness area designed for the world market, and on the other, a large urban industrial area where millions of Argentines struggle to make ends meet.