🔗 Share this article

“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The best time to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research 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, GDP per capita is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.