The idea that the federal government has the responsibility and the capacity to increase the rate of overall economic growth is relatively new. The United States grew from a collection of mostly agrarian ex-British colonies in the 1780s into the world’s dominant industrial and military power by the mid-20th century. But such growth was an accident, the incidental byproduct of policies promoted by various factions for their own short-term purposes. Industrialization to supplant imports was championed by American manufacturing interests that sought to corner the US home market for themselves. These interests successfully used tariffs to exclude manufactured imports from Britain and other industrial nations. Simultaneously, agrarian and mining interests sought the expansion of the borders, at the expense of indigenous Americans and countries like France, Spain, and Mexico. Employers and various economic interests that benefited from more workers or more consumers promoted mass immigration, which was limited mostly by law to white Europeans before the 1960s. American growth resulted from these various selfish projects, not a long-term master plan.

The possibility of endless economic growth itself came into question during the Great Depression. Underlying the early New Deal was the assumption that the most recent industrial revolution, based on automobility and electricity, had reached a plateau. Thinking that continued high growth was unrealistic, many New Dealers sought to focus on distribution of the gains from the existing industrial economy to the less-developed South and West through infrastructure investment, higher profits for farmers through government programs, and higher wages for the working class by means of unions and the minimum wage. FDR made this view clear in a famous address at the Commonwealth Club during his first campaign for president in 1932:  “Our industrial plant is built; the problem just now is whether under existing conditions it is not overbuilt…. A mere builder of more industrial plants, a creator of more railroad systems, an organizer of more corporations, is as likely to be a danger as a help. The day of the great promoter or the financial Titan, to whom we granted anything if only he would build, or develop, is over…. The day of enlightened administration has come.” Many New Dealers feared that the country would lapse into repression and technological stagnation following the end of the mobilization for World War II.

Optimism about the prospects for permanent economic growth, guided by the government, grew after 1945. That confidence was accompanied by the mainstreaming during the war of statistical measurements: GNP (gross national product of national firms at home and abroad) and GDP (gross domestic product only).   

From the beginning, many economists have warned against the promotion of GNP or GDP growth rates as the focus of national economic policy. One of them was Simon Kuznets, who played a major role in the development of the system of national income accounts and pioneered the term GDP. As early as 1934, Kuznets told Congress that “the welfare of a nation can, therefore, scarcely be inferred from a measurement of national income.” Subsequently, he warned: “Goals for more growth should specify more growth of what and for what.”

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GDP not only ignores externalities, like the costs of pollution to society, but makes no distinction between bad and good economic activity. Car accidents can increase GDP by generating more income for emergency responders, hospitals, lawyers, and towing companies, for example. 

To complicate matters, GDP is calculated as productivity times employment, defined as hours of work. This means that in an economy with zero productivity growth, GDP can be increased in various undesirable ways: by increasing the number of workers in the labor market, for example,  by importing huge numbers of low-wage, uneducated immigrants; or by legalizing child labor; or abolishing Social Security and Medicare to force people to work until they die. Alternatively, you can increase work hours with the same workforce — making workers labor seven days a week with no holidays. In a country with zero workforce growth or work-hours growth, GDP can still rise solely as a result of productivity growth. A country with stagnant productivity growth but a ballooning workforce will be worse off over time than one with a stagnant workforce and growing productivity — but the two nations could share an identical GDP growth rate on paper.

These issues have not prevented politicians on both the Left and the Right from claiming that their policies will boost the overall rate of economic growth as measured by GDP. In the 1960s, many technocratic liberals associated with John F. Kennedy’s “New Frontier” and Lyndon Johnson’s “Great Society” were confident that finely tuned, so-called Keynesian fiscal and monetary policies could produce non-inflationary growth. In the 1960 election, the Republican nominee, Richard Nixon, criticized the “growthmanship” of the Kennedy campaign and for neglecting public priorities other than growth.

The “stagflation” (combined stagnation and inflation) of the 1970s led to the adoption of new, non-Keynesian kinds of GDP-driven growthmanship by the mainstreams of both parties. Neoliberals of the Right and the Left, in their different fashions, both claimed that the market would generate greater growth if supply constraints were removed.

For Republican champions of “supply-side economics,” the chief constraint on growth was the supply of capital. The solution was to cut spending on the many and to cut taxes on the rich, who would invest their greater share of national income in growth-promoting private enterprise. But the shortage of capital for investment is a myth. In fact, there has been too much American and global investment capital in search of too few opportunities for high returns. The result of cutting taxes on the rich and corporations may have been the funding of genuinely beneficial new technologies, in some cases. But another result has been reckless gambling in assets, leading to a series of bubbles and crashes in stocks and real estate for the past three decades.  

Among Democrats, Left neoliberals of the Clinton-Obama school had their own version of supply-side economics, based on the false claim that the biggest constraint on American economic growth was a supposed shortage of crucial skills by Americans: “Learn to code!” This mistaken analysis led to two policies that harmed the American economy, while enriching two important Democratic constituencies: educators and Silicon Valley donors.  

Raising the number of young Americans herded into colleges and universities didn’t boost American productivity, and it ruined the lives of great numbers who found themselves doing jobs that didn’t require their expensive college degrees. But the overwhelmingly Democratic education industry cashed in.  

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Meanwhile, tech, finance, and other white-collar industries abused the myth of a skills shortage to justify importing foreign workers who, it was claimed, possessed those critical skills.  Silicon Valley became dependent on a pipeline of young, male workers from India, who weren’t, in fact, better educated than Americans — indeed, many were educated at American universities. But many were willing to work for relatively lower wages as indentured servants bound to US companies or Indian “body shops.” While importing (mostly) young Indians to replace American tech workers or undercut their wages, Silicon Valley simultaneously exported much tech production to low-wage, unfree labor forces in other countries, chiefly China, which combines the worst aspects of communist tyranny and capitalist exploitation.

The mythical skilled-labor shortages of neoliberal propaganda weren’t limited to high-tech industries. Dairy farmers, summer resort owners, hotel chains, trucking firms — all claimed that they couldn’t find Americans with the skills needed to work in their industries, when the truth is that they couldn’t find Americans willing to work for the low wages they were willing to pay in the degrading conditions they insisted upon. This massive, economy-wide “labor arbitrage” — the substitution of lower-wage workers for higher-wage workers with different legal rights or in different countries — was enabled and rationalized by the educational-failure hoax spread by Clinton-style Left neoliberals.

Between them, Reaganite Right-wing supply-side economics and Clintonite center-Left supply-side economics have deindustrialized the US economy to the benefit of China, Mexico, Vietnam, and other low-wage countries. Many of the promised “good jobs” in the tech sector have gone abroad to China or to Indian indentured servants on American soil, instead of to American citizen-workers of all races and class backgrounds. Working-class Americans mostly have jobs in the domestic service sector, where unionization and wage levels have been suppressed by mass immigration, mostly of poorly educated Latin Americans. Republican tax cuts for the rich, far from stimulating economic growth, have ballooned the federal debt and deficit — giving Right neoliberals an excuse to call for cuts in Social Security, Medicare, and Medicaid, instead of raising taxes.

Trump and Joe Biden both broke in important but limited ways with the bipartisan neoliberal consensus. In the Biden years, Democrats subordinated economic growth to “social justice” or “equity.” The centrist Democratic authors of the 2025 manifesto “Deciding to Win” found that between 2012 and 2024, the frequency of the word “growth” declined by 32% — while the frequency of “climate” increased by 150%, the term “environmental justice” by 333%, the term “equity” by 766%, and the term “LGBT/LGBTQI+” by 1,044%.

The logic of the Inflation Reduction Act was political, not economic. All sorts of giveaways could be provided to Democratic voters and donors in the name of promoting the “just transition” to a carbon-free economy based solely on “clean” (renewable) energy. Democratic donors who invested in wind and solar facilities got tax credits. Democratic nonprofit community groups were showered with money to fight climate change by paying people to weatherize buildings and the like. Upper-middle-class Democrats got tax credits for their electric cars and solar-powered heat pumps. Construction unions were promised jobs in the build-out of electrical transmission capabilities, wind farms, and so on.  

Racial minorities? Climate-change projects could require race-and-gender tokenism and funnel money to poor, disproportionately black and Hispanic communities. Feminism? Progressives warned that green construction jobs couldn’t be monopolized by those designated enemies of progressive Democrats: namely, white males. The new Rosie the Riveters, building windmills and soldering solar panels, would need publicly funded day-care for their children during work hours — a long-term feminist goal, given a coat of green paint like other progressive priorities.

On one issue, the Biden administration was ultra-neoliberal: immigration. Sacrificing low-wage American workers to the goal of importing future Democratic voters, the Biden administration unilaterally rewrote immigration law to vastly increase semi-legal immigration, while signaling that most illegal immigration would be tolerated. The result was a stampede from abroad to the US-Mexico border, creating a popular backlash that helped re-elect Trump in 2024.

The second Trump administration’s crackdown on illegal immigration, racially inflected and brutal as it has often been, has worked in creating tighter labor markets and higher wages in some sectors formerly dependent on a steady stream of foreign serfs. And in his second term, Trump has accelerated the reshoring of industry with inconsistent but sometimes effective tariffs.  With these exceptions, however, Trump policy mostly amounted to warmed-over Reagan-Bush-style Right neoliberalism: anti-tax, anti-regulation, and anti-labor.

At the beginning of Trump’s second term, Treasury Secretary Scott Bessent exemplified “growthmanship” with his announcement of a “3-3-3” plan: 3% GDP growth, 3% budget deficits, and 3 million barrels of oil a day by 2028. But with higher taxes and defense-spending cuts ruled out by Bessent, the deficit-reduction goal could be reached only by massive — and thankfully politically impossible — cuts in spending on Medicaid and other middle-class and working-class earned benefits.

At least Bessent’s goal of boosting the GDP growth rate to 3% is more modest than candidate Jeb Bush’s promise in 2015 to boost GDP growth to 4% and Republican presidential candidate Ron Paul’s claim in 2012 that unleashing the free market would cause the growth rate to skyrocket to 10% or even 15% a year. 

In the real world, the US economy has only grown on average by 3% since the 1950s. And mid-20th century growth was boosted by an expanding workforce. In 21st-century America, with a swelling share of retirees and political limits to immigration, most GDP growth must come from productivity gains.  

The problem is that productivity growth depends on unpredictable scientific and technological breakthroughs and their impact on the economy. As the economist Joseph Schumpeter and others have pointed out, technological innovation tends to come in bursts, driven by a transformative “general purpose technology” like the steam engine, the internal combustion engine, electricity, and computers. Governments can help only up to a point, by directly or indirectly subsidizing R&D and promoting the diffusion of new technologies.  

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Artificial Intelligence may turn out to be a GPT that inaugurates a new age of prosperity — or it may not. Outside of information technology, most breakthroughs in the material world occurred generations ago. Nuclear energy, photovoltaic solar panels, and jet engines were all developed before 1960. The US Bureau of Labor Statistics projects that between 2025 and 2035, the US economy will grow by only about 2.1% each year, the result of a mere 0.3% growth in the workforce combined with around 2% average productivity growth.  

But most of the growth is likely to be concentrated in a few high-tech software or manufacturing sectors — think self-driving cars and trucks — while most new jobs will be in occupations that can’t (yet) be automated or offshored in the nontraded domestic service sector — think nurses and caregivers for the elderly.  

Here is an opportunity for a new center Left — and perhaps a new center-Right. as well — to break decisively with both Right-wing tax-cut neoliberalism and centrist-liberal skill-shortage neoliberalism. In principle, there is nothing wrong with an economy in which labor-saving technology allows goods production, agriculture, transportation, and, in time, construction to be done by robots and computers, with humans working in “high touch” personal service jobs — as long as those service sector jobs pay good wages and have good benefits and good hours.  

We can debate what government policies are necessary to ensure that, say, nursing-aide jobs are middle-class jobs — “predistributive” measures like increased collective bargaining, or “redistributive” measures like after-tax subsidies to low-wage workers and their dependents.  Social conservatives who want to subsidize family caregivers at the expense of commercial or public care can take part in the debate. But except as annoying hecklers, free-market conservatives will have no part in our national conversation on how to share the gains of whatever growth there may be, for the simple reason that free-market dynamics, without some kind of government intervention, will never translate the profits of investors in self-driving cars into higher wages and guaranteed vacations for nursing aides. 

If there is a lesson from all of this, it may be that abstract long-term national economic growth shouldn’t be an object of public policy at all. Nobody, including academic economists and federal civil servants and Wall Street analysts, is smart enough to devise a plausible plan to grow GDP at this or that target rate. Most voters don’t know what GDP is and choose between the parties on other issues. In practice, growthmanship leads to promises that are quickly forgotten, like Bessent’s 3-3-3 plan, or to giveaways to partisan constituencies justified with the rhetoric of growth, like Biden’s Inflation Reduction Act.

It might be best to avoid the hubris of post-1945 growthmanship in all its forms and return to the tradition of focusing on particular opportunities or threats — knitting the country together with canals, railroads, or highways, using tariffs to replace British imports with American manufactured goods, replacing slavery with free labor, beating the Germans to the atomic bomb, developing computers, satellites, and rockets in the course of geopolitical competition with the Soviets — and then welcoming, or dealing with the unwanted consequences, of any growth that happens to be generated as a side effect.

The Trump Accounts went live on July 4, and Hannah’s daughter is among the 6 million children whose parents have opted in, so far, but they may not be getting what they bargained for. 

Most parents, like Hannah, are thrilled to have an opportunity to invest in their child’s future. Tax attorney and retirement-planner Adam Bergman, founder of the IRA Financial Group, claimed his children will “be tax-free millionaires.” Others are a little skeptical of the Trump connection. Hannah says her partner criticized her for setting up the account. “He was like, ‘Trump’s name is on it, you never know who they’re tracking with that,’” she says. Some, also, are worried that this will be yet another empty promise, like the savings from DOGE and tariffs. 

In promoting this plan, Trump told the nation, “We’re doing something much better than giving the next generation a handout. We’re giving them ownership of America’s future.” But in January, Secretary of the Treasury Scott Bessent said the quiet part out loud. Trump Accounts, he proclaimed, would “render socialist notions moot by making every citizen a shareholder.” He called the program “the largest merger in history between Main Street and Wall Street,” and for once the hype was accurate, because a merger is exactly what the accounts are, and in a merger, somebody is always the acquirer.

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All children under 18 can be enrolled, but a Trump bonus of $1,000 from the Treasury is reserved for every citizen baby born during Trump’s second term, roughly 14.3 million children, about $14.3 billion. The funds will be invested in S&P 500 index funds and held at Bank of New York Mellon until the child is 18, and then converted into an IRA. Parents open the account with IRS Form 4547 or at TrumpAccounts.gov; the activation notice arrives from no-reply@TrumpAccounts.Treasury.gov, which is its own small poem. The tracking app was designed in partnership with Robinhood, the firm that put confetti animations on stock trades until regulators objected, and the app’s projection screen shows a parent what patience purchases: $6,000 or so by 18, $243,000 by 55, assuming historical returns and no further deposits. Fifty-five: the horizon of reward offered to a person three weeks old is the far side of her working life. 

Then comes the private money, stacked on top like a christening gift from people the child will never meet. Michael and Susan Dell have pledged $6.25 billion to put $250 into accounts for some 25 million children in ZIP codes below a median income threshold. Barbara and Ray Dalio, billionaire investor and founder of Bridgewater Associates, put up $75 million for Connecticut’s children. Micron announced $250 million, with the president himself relaying the news. More than 50 companies, SoFi and Charter and BlackRock and Charles Schwab among them, have promised to match the federal $1,000 for employees’ children, and the press releases all strike the same notes of opportunity, ownership, and the American Dream, in the cadence of a benefits enrollment packet. Which, structurally, is what the accounts are. 

The offer is in many ways an old one. Every time American capital has faced a crisis of legitimacy, it has responded by offering the public a sliver of ownership instead. Not power over the enterprise. Not a claim on its governance, and certainly not a raise. There is no recognition of the labor. A share: the smallest unit of belonging that capital can issue without changing anything about itself. Shareholder democracy is the recurring ideology of wage defeat, and you can date its recurrences by the troughs of labor’s fortunes the way a geologist dates strata.

Consider the last time the phrase “every citizen a shareholder” ran this hot. In 1954, the New York Stock Exchange, under its then-president G. Keith Funston, launched a campaign called “Own Your Share of American Business.” The Exchange had a problem: hardly anyone owned stock. A Brookings census commissioned by the NYSE itself had found only about 6.5 million adult shareowners in 1952, a small percentage of the population. So, the Big Board went into mass-merchandising mode. Its Monthly Investment Plan let a family buy into the market for as little as $40 a quarter, stock on the installment plan, like a Frigidaire. 

Theodore Repplier of the Advertising Council, back from a world tour and convinced that “capitalism” carried an unpleasant odor abroad, rebranded the American system as “people’s capitalism,” and Eisenhower endorsed the phrase for worldwide use by the United States Information Agency. The campaign was test-marketed on Americans themselves at a 1956 exhibition in Washington, in cheerful defiance of the Smith-Mundt Act’s ban on domestic propaganda, before being shipped to trade fairs on several continents. The exhibit’s message was that the United States had dissolved the class question: here the worker was a capitalist, and so there was nothing left to fight about. Yet a 1958 American Economic Review article found that stock ownership remained radically concentrated at the top. The campaign was a success: not at making workers rich, but at its real aim of making the question of who got what sound obsolete.

That is the ancestry Bessent was claiming in January, whether he knew it or not. The people’s-capitalism campaigns flourished in the 1950s precisely because the wage question had been settled, temporarily, by the thing the campaigns never mentioned: a third of the workforce in unions, and contracts with wages high enough to afford the suburbs. Ownership talk was the dessert, not the meal. The next recurrences, however, came when the meal was being taken away. 

Peter Drucker, business and management guru, announced in 1976 that “pension fund socialism” had arrived: workers would own American industry through their retirement funds. Yet at almost exactly that moment, the industrial order that funded those pensions began to be dismantled. The rise of globalism, coupled with neoliberalism, created an economic order that saw American manufacturing offshore at an alarming rate. By the next decade, companies like GM had more pensioners than employees. Two years later, Congress wrote section 401(k) into the Revenue Act, a technical provision for deferring executive bonuses, and by the early 1980s, a benefits consultant named Ted Benna had convinced employers that it could become the replacement for the pension itself. The defined-benefit pension was a claim on an employer. The 401(k) is a claim on the market. The transition was narrated, throughout, in the language of ownership, empowerment, and choice, and it moved decades of market risk from firms onto households, which is not a side effect of the design but the design itself.

Each new scheme came with changes to other retirement plans or Social Security, in addition to changes in other benefits. In the long term, they were never pure additions. So, while the Trump Accounts do not mention a bait and switch, we should be mindful of the history lesson behind these efforts. 

George W. Bush gave the pattern its most candid name. He proclaimed the “ownership society” as manufacturing employment cratered and the union share of the private workforce slid toward single digits. His centerpiece, unveiled in 2005, was the plan to partially convert Social Security into private accounts. That campaign failed. The Trump Account is the same proposal approached from the other end of life. You could not persuade a 60-year-old to trade her guaranteed benefit for a portfolio, but a newborn needs no persuasion. Michael Lind, no man of the Left, has already made the blunt version of this point: accounts like these will furnish politicians with a standing excuse to cut the universal programs.

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The honest counterargument deserves its paragraph, though. Compounding is real; $1,000 at historical equity returns genuinely becomes a meaningful sum over five or six decades, and universality is nothing to sneer at, since the program reaches the children of parents who would never open a 529, with no means test and no stigma. A baby in the poorest ZIP code in Memphis could now hold the same instrument as a baby on the Upper East Side. All true, and all beside the structural point, because the instrument is identical, but the machine attached to it is not. Contributions can run to $5,000 a year, which means the account compounds family wealth wherever family wealth exists and compounds the initial $1,000 wherever it does not. The projection screen shows every parent the same curve. The curve will be climbed by the children whose grandparents can feed it, which is to say the account does not offset the existing distribution; it is a multiplier sitting on top of it.

And notice what the multiplier runs on. The heartbeat of this plan is the S&P 500’s returns; thus, the very returns the app so cheerfully projects are in meaningful part the earnings that firms retain by holding labor costs down, automating when possible, and buying back their own shares. The newborn shareholder’s interests have been enrolled, from the crib, on a particular side of a particular ledger. This is the part of the program that deserves the word ideological, used precisely. American elites rarely bother suppressing opposition when they can reorganize identification instead. The Trump Account redistributes almost no wealth; the Treasury’s own thousand is a rounding error against the contribution architecture above it. What it redistributes is a point of view. The child will grow up checking a balance whose health depends on the market’s side of every fight she might otherwise have joined. Welfare capitalism used to do this with company stock and a company picnic; the historians among us wrote books about it. Now it arrives by app, with an employer match announced in a press release, and the company picnic is a push notification.

Meanwhile, hold the offer up against what is not on offer. Real wage growth is flat, and prices are still too high for the average American. No one in Washington is proposing that the newborn’s father be paid more, or that his schedule be predictable, or that his warehouse recognize a union. The proposal on the table is that his daughter own 11 basis points of the warehouse’s landlord. There is a genuine political theory in this, and Bessent stated it without blushing: make every citizen a shareholder. Thus, ownership talk answers the wage question by changing the subject, as it has now changed the subject four times in 70 years. 

Which returns us to the child. Civics used to be a set of claims about what citizens owe each other; the Trump Account is a claim about where security comes from, installed before one has the ability of speech. She will learn, from the first time her parents check the app, that her future is a balance; that the balance moves for reasons no one around her controls; that patience is the whole of virtue and 55 the horizon of reward; and that the government’s founding gift is a trading position. A position must be held. Holders do not strike, do not agitate, do not ask who set the terms; they wait, and check the screen, and hope. That is the citizen the account is designed to produce, and the design will work on many. The $1,000 is real, the compounding is real, and so is the lesson. 

We have decided to tell American children where they stand by opening the market to them at birth. They will spend the next 55 years watching an app to check their standing, but will find out that the market was never the thing that stood for a decent or happy life. It was simply the thing that got there first.

And parents, of course, don’t have a better option, or aren’t aware of one. “Real parents, Left or Right, don’t have time to get involved in labor activism,” Hannah says. “We’re just working and investing and trying to set our kids up for the best success rate.” 

And so, the republic, in its 250th year, has settled its account with the newborn. Not a nursery, not a clinic, not a school, not her father’s raise; a custodial 530A, managed by Bank of New York Mellon, gamified by the makers of the confetti trade app, topped up by a chip company’s press release. She is three weeks old and already long the S&P.  Her first civic document arrived from no-reply@TrumpAccounts.Treasury.gov, which is the entire social contract in a sender field: here is your stake, do not write back. 

With this announcement, the US government indicated its readiness to do whatever was necessary to ensure the success of Milei’s agenda of economic reform. The next day, after his rambling address to the United Nations, Donald Trump met the Argentine President himself. Milei and his government didn’t need a bailout, said Trump, but he promised support. “We’re gonna help them.” 

The effect was instantaneous. Investors who had been fleeing Argentina now began returning, if cautiously. The Argentine stock market rose from the lows it had hit on Monday. The Argentine peso, which hit a low at the end of last week, bounced back strongly this week. Argentine government bonds, whose prices had been nosediving, driving up interest rates, also rebounded — although interest rates still remain well into the double-digits. The White House has given Milei a bit of breather; it now hopes that respite will last until next month’s legislative elections. 

There’s been little evidence of contagion-risk from Argentina’s recent financial travails. Its plunging peso hadn’t dragged any other currencies down with it, and regional stock markets continued rising even as the Buenos Aires market shed a quarter of its value since early August. But Bessent’s stark choice of language was revealing. An awful lot has come to ride on the success or failure of the chainsaw-wielding libertarian in the leather jacket. 

The Trump administration has made Argentina its line in the sand, its Vietnam, the bastion that must hold lest it fall before the Leftist tide sweeping the region. It is a tide that has already washed over Brazil, Colombia, Mexico and Chile. The administration may not have intended to invest the Milei experiment with such significance, but the fact is that American Republicans, enthusiastically egged on by Elon Musk and celebrated by conservatives across the Western world, had already lionized the chainsaw-wielding libertarian as a hero. He can’t now be seen to fail.

There was always going to be a lot of risk involved in putting so many eggs in the Milei basket. This is Argentina, after all, a country in which rescue packages repeatedly yield success, only to eventually unravel. It’s often said that Argentina is the most European country in Latin America, a place where Spanish is spoken with an Italian accent, and where the considerable degree of regulation in the country’s economy mirrors that of some European countries. But, like those countries, Argentina can be repeatedly crippled by inconsistent policymaking. It has a long history of boom-and-bust cycles, lancing inflation only to resume business as usual once the worst has passed.

Milei won election as president in 2023 on a platform of slashing the state and taming the country’s runaway inflation. Initially, things went better than hoped. By cutting public spending by the equivalent of 5%, Milei plunged the economy into recession. But that downturn reduced demand sufficiently to take the sting out of inflation, which fell from 300% in 2023 to 30% today. Whereas previously, the price of a cup of coffee could change by the time you finished it, now there is at least a growing predictability in household budgeting. 

After two years of economic contraction, the economy has rebounded strongly. While government spending remained tight, private consumption picked up the slack, and investment took off and exports resumed, growing by 7% this year. Milei’s voters liked what they saw, and his approval rating briefly touched 50% early last year. In Argentina, a country that is deeply divided, this is about as good as it gets. 

But thereafter, things started to sour. While exports have been strong this year, imports have surged past them, rising six times quicker. In no small part, this is due to Milei’s determination to maintain a currency peg. This means that the peso is allowed to trade within a fixed range of valuation. The Central Bank can maintain this valuation by buying or selling foreign exchange whenever the peso moves outside the band. Mindful that a sharp devaluation of the peso could reverse his progress on inflation, Milei has wanted to gradually adjust the band. But in recent months, increasing demand for hard currency has forced the government to dip into its reserves. With the Central Bank burning through cash, the risk of a self-fulfilling run on the peso had risen.

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But the resulting strong peso has enabled middle-class Argentinians to keep holidaying abroad. Meanwhile, imports remain affordable, helping to drive that surge in foreign purchases. By the late summer, pressure on these reserves was becoming acute, and the government ran the risk of running out of money. What made the situation especially delicate was that Argentina’s reserves had been swollen in April by a large disbursement from the IMF. But this use of borrowed money to defend the currency has troubled bondholders, who have begun to worry whether the government will be able to meet its debt payments. After all, Argentina has form here: for fear that bondholders from previous defaults might seize the country’s assets, the government is still reluctant to fly its officials abroad in government airplanes.

Hoping to reduce the appetite for imports and make exports more competitive, Milei wanted to devalue the peso further. Knowing the move would be unpopular, he was holding out until after the legislative elections. But his hand was forced by a shock result in the Buenos Aires provincial election earlier this month, when his La Libertad Avanza coalition was soundly defeated. Although Buenos Aires is a bastion of the opposition Peronists, the province also holds 40% of the country’s people, so it’s a good bellwether of what to expect next month. Currency traders, pondering the possibility that Milei would suffer a setback and lose authority, started dumping their pesos.

Milei does not currently have a parliamentary majority. Because only half the legislature is up for election next month, there is no prospect of that changing, but he hoped to secure enough seats that he could govern in coalition with centrist parties. Thus the poor showing earlier this month raised the prospect that Milei could end up weaker than expected. Compounding matters is that Argentina’s federal system means the president must get provincial buy-in for many of his measures to be effective. Absent a strong mandate, Milei could find himself struggling to govern effectively.

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And that could impede his plans for further reform. In addition to liberalizing trade and allowing the currency to float, there are structural reforms Milei must implement if he’s to improve productivity. These reforms include a reduction in labor market regulation and social security taxes; reforming the tax system; reforming the rules by which revenue collected in Buenos Aires is transferred to provinces; and lowering the obstacles to new business formation. Yet all these existing barriers to economic activity have powerful constituencies behind them, from unions and business groups to political lobbies. Though Milei has made more progress on business deregulation, the road ahead is getting bumpier. Austerity eliminated many subsidies, on items such as gas, water, transport and electricity, all of which have hurt ordinary people. 

To top it all off, Milei’s brand — that of a fiercely new kind of politician — was tarnished by the news last month that his sister and close adviser was under investigation for corruption. Leaked audio recordings caught a former government official revealing a kickback scheme that Karina Milei was running on government contracts. Outrage erupted. Following the revelation, Milei found himself pelted with stones when he attended a party rally late in August.

He has a narrow course ahead. A collapse in the peso now would jeopardize his hopes for gains in next month’s elections, and could thus be the death knell for his government. The White House’s rescue may therefore enable him to make it to election day, but it’s a gamble for Washington. If all the White House needs to do is offer the “whatever-it-takes” reassurance it has given Argentina, and it doesn’t actually have to bail the country out in any way, it will have been a well-judged intervention. But the US administration will have to hope that investors don’t call its bluff. If the run on Argentine markets resumes, Trump will have to decide whether he is prepared to back up words with money. And bailing out a foreign government at a time the US is cutting its spending on domestic programs could go down badly with American voters. 

As for Milei, he still has his date with the electorate next month. Endorsement and backing from the Trump administration may be all he needs to get his reform program back on track. Equally, in a country where nationalism runs strong, it could backfire. Javier Milei can breathe easier today, but only for long enough to resume the race.

It is hard to exaggerate the role of the dollar in the global economy. It is the currency that holds the financial world together “in its inmost folds”, as Goethe put it in Faust. Since the Forties, the US has been the anchor of the global financial and monetary system. It’s a set-up that made sense at the time. It did so all the way up until the collapse of communism. But this millennium, it has become more like a Faustian bargain. It has allowed Europe and Asia to specialize in industrial production and dump their trade surpluses onto the US, and to a lesser extent the UK and Australia. America, meanwhile, has been only too happy to play along, running large trade deficits against the rest of the world. But this came at the cost of de-industrialization — arguably the very reason Trump was first elected.

Economists mostly do not care about such imbalances. David Ricardo’s theory of comparative advantage suggests that everybody is better off when they specialize and open the borders to trade, and let the deficits and surpluses fall wherever they may. This Faustian bargain works until it hits big political obstacles. Obstacles like Trump.

The irony, then, is that even as it created the conditions for his election, the continued success of the global free trade system depended critically on Trump not getting elected. It depended on him not imposing tariffs on steel and aluminum, for example, or on threatening retaliatory tariffs over 200% on French wine and champagne. Now that part of the bargain is crumbling.

Trump is clearly not worried about global imbalances, or the sustainability of the global economic order. He thinks of trade balances like business deals. The country with the surplus is the winner. This is without a doubt the wrong way to think about, but Trump’s crude trade policies may be the only thing that spurs change. There is no way that China or Germany would ever voluntarily refrain from running export surpluses. They, like Trump, define their economic models in terms of trade balances. It will take a political sledgehammer to force them to change, which is what is happening right now.

The tariffs, though, are only one part of the story — the visible part of the bargain and the one that is receiving most of the media attention. But there is another, more important side to it, the financial side, in which the dollar underwrites the entire global economy. The current system means that when, say, Porsche exports a car to the US, two things are happening. The car moves from Germany to the US; the dollars move in the opposite direction. You could think of the transaction in a different way: Porsche is buying US dollars, and pays for the dollars by delivering cars. So when countries dump their exports on the US, they are buying US dollars. Accordingly, when a lot of foreign companies do this, the value of the dollar goes up. The dollar accounts for almost 60% of central bank reserves, but the US only accounts for 14% of the world’s economic output, if measured in purchasing power. But the dollar is not only the biggest currency. It is also one of the most overvalued. The two concepts, the global role of the dollar, and its relative value, are not the same, but they are linked. And this is where Team Trump sees an opportunity.

If the dollar is devalued, Porsche, in our example, would still get the same amount of dollars, but these dollars would be worth less. And Porsche would be powerless to do anything about it. This makes devaluation far more effective than tariffs from the US perspective. Tariffs are legally and procedurally complicated. Countries can, and do, retaliate. It is much harder to retaliate against a devaluation.

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When I first heard that Trump’s finance team, led by Scott Bessent, the treasury secretary, was trying to devalue the dollar, it seemed that they had not thought this through. I thought this was the Achilles heel of Trump’s economic agenda because it seemed to have conflicting goals — to keep the dollar’s global predominance and reduce its value at the same time. How on earth could they do both? I put this down as an unresolved contradiction in Trump’s head. Like the English cake aphorism, you could describe it as having your dollar and selling it — something only Trump would do.

The reason Trump cares about having his dollars is not to support the global economy, but because of its geopolitical power. There is no other currency that could take its role. The second largest currency in the world is the euro. It accounts for some 20% of global reserves. But the Europeans are not equipped to play the role the US is now leaving vacant.

I hear a lot of nonsense about the EU as the new leader of the Western world. But Europe has aging populations, and its economy is much less innovative than those of the US and China. The EU depends on other countries to buy its exports. It does not suck in foreign capital as the US has done. Unlike the US, the EU does not have the equivalent of US treasury securities, government bonds with a reputation of being the safest assets on earth. The EU has a monetary union, but it lacks a political union. Nor does it have a large capital market. It lacks the infrastructure of a global economic power.

Given Europe’s weakness, Trump’s goal to devalue the dollar and to maintain the dollar’s global role might not be as contradictory as at first seems. It does beg the question though, if the world diversifies away from the dollar, and if the euro cannot absorb this, who else will?

Enter crypto-currencies. Is this perhaps why Trump has just signed an executive order to create a strategic crypto reserve, very much like the strategic petroleum reserve which the US set up in the Seventies after the oil crisis? Crypto is purely ethereal, not backed by any assets. Fiat money, like the US dollar, is also not backed by assets. Our currencies are issued by governments. Money, whether fiat or crypto, relies on trust. The French philosopher Jean-Jacques Rousseau talked about money as a social contract. I always thought of this as a more useful definition than the much narrower point of view of economics, which defines money as providing three services: to act as a medium of exchange, a store of value and a unit of account. This does not capture the bigger picture: if we lose trust in our own money, we use someone else’s. Given the central banks’ failings since the crash, it is perfectly reasonable for people to be skeptical about money. It is also rational for people to be skeptical about crypto currencies like Bitcoin. They are highly volatile, so they are not really a store of value. They are definitely not a unit of account. And you cannot go to most shops and pay in crypto.

But crypto currencies have one killer feature: their supply is fixed by algorithm. People still dig for gold and find some. They might even find some on Mars, if they started digging there. But they are not going to find any Bitcoin. There is no central bank in the crypto universe. There are no economists involved — perhaps one of the reasons economists hate crypto with such a passion.

Crypto, then, is well placed to play an important part in the global dollar detox story, as we move towards a different monetary system. Apart from setting up a strategic crypto reserve, the US administration and Congress are about to implement a regime of ultra-light crypto regulation. This may be the answer to how Team Trump is going to address the dollar-cakeism problem. If foreigners diversify away from the dollar and move towards crypto, then the US would stay in control: the dollar remains the number one fiat currency, and the global crypto market is also concentrated on the US. Either way, Trump wins.

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Such tactics are borne out by the emergence of what is sometimes referred to as the Mar-a-Lago accord, whereby the US will no longer play the anchor of the global monetary and financial system. Europeans will not only have to wean themselves off the US for defense, but also for finance and trade. It would be the biggest shift in the global economy since the 1944 Bretton Woods accord. That system went through various mutations, originally based on gold, but throughout this entire period, the dollar was the lynchpin. Before the Americans, the pound was the global reserve currency. But before that, there were no backstops. From the Greek empire all the way to Napoleon, European rulers issued coins made from precious metals, mostly gold and silver. With the US no longer willing to shoulder the responsibility of keeping the system going, we may well be returning to that world, except in today’s world, crypto is the new gold.

The brains behind this transition is Bessent. He is the guy who did the critical analytic work that allowed George Soros to carry out his infamous assault on the pound in 1992 — one of the most devastating acts of financial speculation of all time. Earlier this month, he stated clearly that “international economic relations that do not work for the American people must be re-examined”.

It’s a realignment that carries serious risks. It reminds me of that point in Christopher Nolan’s Oppenheimer when a scientist asked whether a nuclear bomb could unleash an atmospheric chain reaction that could destroy the world. The answer he gave was: possibly, but unlikely. Similarly, here, nobody can rule out the possibility that the sudden withdrawal of the US as the global financial anchor could lead to a catastrophic financial meltdown. It might be possible. It might be unlikely. But what is significant is that for the first time in 80 years, someone is seriously trying to make it happen.

In reality, Trump might be the most radically libertarian commander-in-chief in US history. This, contrary to the fears of #Resistance liberals who created an entire cottage industry devoted to fighting Trumpian dictatorship; contrary, too, to the dreams of populists, “post-liberals,” and others in the so-called New Right who imagined that Trump would reconcile American conservatism with the state and promote the use of government power for Right-wing ends.

The fascist theory of Trump remains prevalent among progressives to this day, and received a boost in the closing days of the election when a former chairman of the Joint Chiefs of Staff, Gen. Mark Milley, and former Trump chief of staff John Kelly went on record calling Trump a fascist — which allowed Harris, Hillary Clinton, White House Press Secretary Karine Jean-Pierre, and a whole host of Democratic leaders to pile on with the fascist assertion. In The New Yorker, the Yale historian Timothy Snyder greeted the news of Trump’s electoral victory by calling Trump a fascist along with his “close fascist allies,” Elon Musk and Vladimir Putin.

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Trump is vindictive, no doubt. By one estimate, he has made more than 100 threats to “investigate, prosecute, imprison, or otherwise punish his perceived opponents”. But fascism has come to be a slippery label. As The Washington Examiner has archly put it, “fascism is anything Democrats don’t like”.

The libertarian explanation, by contrast, is becoming more plausible by the day. Trump has made no secret of his leanings in this regard. In May, he spoke at the Libertarian Party National Convention — the “first president in history” to do so, as he boasted. His address, in which he attempted to stake his libertarian credentials, was remarkably on-message: “I will be a true friend to libertarians in the White House, and I am proud to be the only president in 70 years who started no new wars. I took on the military-industrial complex. I broke the stranglehold on neocons and warmongers on the Republican Party…. I withdrew from the Paris Accord. I withdrew from the anti-gun UN arms treaty, and I withdrew from the corrupt and very expensive World Health Organization”. He concluded by saying: “We want libertarian votes because you stand for what we stand for”.

The address was a somewhat strange spectacle, since Trump was booed by the crowd through much of it. Deep-dyed libertarians from the crowd shouted that he was a “tyrant” and “had crushed our rights”; one held up a sign calling him a “wannabe dictator”. But Trump’s position was that he had simply made libertarianism work tactically by tying it to the GOP. “What’s the purpose of the Libertarian Party getting 3%?” he argued with the crowd, inviting it to join forces with him.

Trump’s October interview with Joe Rogan — featuring his largest audience of the entire election cycle — was distinctly libertarian, as well. He argued for eliminating the income tax and railed against government regulation. He declared an intent to remove all governmental impediments to business, to make government truly as small as possible.

In tandem with his tax-eliminating, government-downsizing rhetoric, Trump developed a partnership with a number of Wall Street and Silicon Valley barons, culminating in Musk throwing his massive financial weight behind the GOP ticket. The two things — the libertarian rhetoric and the new alliances in tech and finance — went hand-in-hand, resulting in policy moves that should have utterly confounded Trump’s populist fans during the campaign.

Take Trump’s stance on legislation to ban TikTok unless the social-media platform separates itself from its Chinese owners. It should have been a perfectly Trumpian policy, striking at two birds, Big Tech and “Chy-na,” with one stone. Yet Trump came out against the ban, having earlier backed it, without offering a coherent explanation. It was notable, though, that one of Trump’s big libertarian backers, the hedge-fund honcho Jeff Yass, controls a minority stake in TikTok estimated to be worth north of $30 billion as of spring 2024.

Another telling campaign moment came when Trump appeared on an X (formerly Twitter) space with Musk and congratulated the world’s richest man for swiftly firing workers who organise to defend their mutual interests. A better Harris campaign might have made more of that unguarded moment for the way it belied Trump’s pro-worker rhetoric. Even Sean O’Brien, the president of the Teamsters and a rare trade-union leader willing to work with the GOP, was forced to accuse Trump and Musk of waging “economic terrorism”.

On immigration, too, Trump has allowed his libertarian instincts to run wild. This might appear surprising, since border restrictionism was and remains one of the signature elements of his agenda. But opposing chaos at the border isn’t incompatible with a libertarian stance. Many libertarians object to illegal migration, even as they support making it easier for labor to cross borders as a means to lowering its price.

During his campaign, for example, Trump said that the advent of artificial intelligence requires the United States to bring in “more people.” He also offered green cards to all graduating foreign university students, even those taking two-year associates degrees. These stances should have raised concerns among Trump’s populist supporters, but their enthusiasm swept all doubt.

Now, as his administration takes decisive shape, Trump is translating his libertarian instincts into personnel choices. The planned Department of Governmental Efficiency — headed by Musk and the venture capitalist Vivek Ramaswamy — is only the most visible. Musk has claimed that he could eliminate up to $2 trillion worth of expenditures from the federal government. In an op-ed in The Wall Street Journal, Musk and Ramasaway described themselves empowering a “lean team of small-government crusaders … to cut the federal government down to size.”

Likewise, on the use of H1B visas that allow tech firms to import cheap workers, Trump sided with the likes of Musk and Ramaswamy — over and against his populist base. Last month, the president-elect told the New York Post, “I’ve always liked the visas, I have always been in favor of the visas. That’s why we have them. I have many H-1B visas on my properties. I’ve been a believer in H-1B. I have used it many times. It’s a great program.”

Other personnel choices bespeak similar intuitions: from snubbing his first-term tariff guru Robert Lighthizer for the top job at the Treasury in favor of Wall Street stalwart Scott Bessent; to tapping Howard Lutnick, another Wall Street man who has advocated for eliminating the income tax, to serve as commerce secretary. True, there are a handful of exceptions, such as his choice to lead the Department of Labor, Rep. Lori Chavez-DeRemer of Oregon, a rare Republican who favors strengthening collective bargaining; and Gail Slater, an antitrust crusader nominated to the Federal Trade Commission.

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These exceptions damn Trump in the eyes of “official” Washington libertarians, who view him as not nearly pure or orthodox enough. But Trump isn’t pure or orthodox on anything, and the salient question isn’t whether he qualifies as libertarian for the purists, but the overall makeup of his political inclinations. On that front, his plans for a massive reduction in government are a better fit for libertarianism than for populism, much less fascism.

This isn’t to play down the Trump threat from a progressive perspective. Libertarianism is a naïve ideology that risks cutting deeply into the core functions of a state. What’s insidious about libertarianism is that it looks good at first. Listening to Trump talk about over-taxation and overregulation with Rogan, I couldn’t help but nod along. The problem is the erosion of state capacity and mounting red ink.

In his first term, Trump increased the deficit by $8 trillion — a direct result of tax cuts that endeared him to Wall Street while slashing the US tax base without generating any other source of revenue to replace it. This time around, Trump and the Republicans are determined to maintain his earlier tax cuts while dramatically diminishing the state. That’s a recipe for a plutocratic order that rewards those at the top, while squeezing the working- and lower-middle-class Americans who sent Trump back to the Oval Office.

There is simply no way to trim $2 trillion from the federal budget, as Co-President Musk aims to do, without eating into entitlement programs like Social Security and Medicare. So-called entitlement reform is deeply unpopular among nearly all social segments, Republicans and Democrats — except for the Wall Street fee-skimmers who’d benefit from administering privatized benefits and, of course, libertarian think-tankers in Washington.

Trump’s penchant for pulling all attention toward himself is reminiscent of a Mussolini type and thus seems to foreshadow an authoritarian takeover. But real authoritarianism takes work that Trump is uninvested in — and a state he’s unwilling to fund. He has a businessman’s revulsion for taxes and regulations. The other aspects of his worldview, including ones that seem to contradict his aversion to the state, amount to tactical maneuvring in service of his deeper pro-business agenda. That puts him in the libertarian camp, whether the libertarians themselves like it or not.