🔗 Share this article

“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. The president has placed a limit on the peso to control triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this stance will allow it to depict the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.