🔗 Share this article

“Dollars, dollars.” Under the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the voting concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to control inflation under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a poor performance 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.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be 10% lower in nations run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.