Argentina’s newly elected president, Javier Milei, arrived at Davos with a stark warning. “[The] western world is in danger … because those who are supposed to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism and thereby to poverty,” the libertarian told the World Economic Forum.

What is this vision he refers to? “Different versions of … collectivism.” Old-school socialism entailed the state owning the means of production. It failed, miserably. Yet Argentinians can attest that decades of “printing money, debt, subsidies, interest rate controls, price controls and regulations” designed “to correct so-called market failures” and achieve “social justice” have produced similarly catastrophic results.

To British liberals, Milei’s warning may seem excessively shrill. What about all the good that government can do? But Argentina is a tragic case study of how a gradual erosion of economic freedom strangles prosperity. In the early 20th century, its GDP per capita was comparable to France and was 75 per cent of America’s. Decades of mammoth budget deficits, money-printing, protectionism and stringent regulations have left Argentinians a third as rich as Americans today.

Viewing Milei’s rhetoric through the lens of British political standards is thus a luxury. When Milei seethes about a “political caste”, our pundits understandably fear populism. Yet his election reflects a backlash against genuine populism that sank Argentina to 158th out of 165 nations in the economic freedom rankings, above only Venezuela, Zimbabwe, Syria, Sudan, Yemen, Iran and Libya. Annual inflation — now more honestly reflected under Milei — is running at 211 per cent. Forty per cent of Argentinians live in poverty. Who wouldn’t be livid at this utter catastrophe of human potential?

Extricating Argentina from its macroeconomic mess remains economically and politically perilous. One wrong step managing the ailing peso could destroy Milei’s presidency. He has few supporters in the legislature and is attempting to achieve a sharp deficit reduction by restraining spending and shedding regulations, using controversial executive decrees. The forces of opposition are mobilising. Latin American politics is, sadly, a tragic litany of false dawns, unrealised potential and abused power. Who knows where this ends?

Yet that makes it remarkable that Milei used his first big international speech not to shore up support for his macroeconomic agenda, but to warn us about our direction. Western governments are already turning their backs on the classical liberal programme of “unrestricted respect for the life project of others”, he said, by growing governments’ footprint on our lives. Bad economic ideas, socialist agitation and a supine business class were all culpable and Argentine-style poverty would be the result.

Modern economists open the door to collectivism by constantly identifying theoretical “market failures”, he said, demanding government regulatory solutions. Yet markets aren’t perfect, nor are they perfectible. Indeed, the unattainable promise of creating perfection through aggressive competition policy and regulation damages growth by eliminating returns to scale and distorting market prices. More regulations follow to pick up the pieces, compounding the problem.

Marxists in universities, the media and international organisations may have given up on economic socialism, but they now instead foster “social conflicts”. They pitch women against men and human beings against the environment, demanding fresh regulations policed by domestic and international bureaucracies to tilt the deck.

Davos’s stakeholder capitalism and its apologising for profits provides more momentum for collectivist ideas. In a free economy, “capitalists … are social benefactors who, far from appropriating the wealth of others, contribute to the general wellbeing” by creating value, Milei said. “Do not be intimidated … [or] surrender yourself to a political class” by accepting that “your ambition is immoral”.

Liberals can disagree on the appropriate contours of the state and Milei avoided discussing thornier issues where state intervention is better justified. But we should heed Argentina’s warning. Wealth, natural resources and an educated population are no bulwark against impoverishment if economic freedom is continually eroded.