🔗 Share this article

“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency after the election concludes. The president has imposed a limit on the peso to control soaring price increases and currently it remains artificially high and reserves are depleted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim command of the economy from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.