“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the US dollar.
“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”
Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election is over. The president has imposed a cap on the currency to tame soaring inflation and now it is overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.
The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.
Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.
These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.
Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to bring price rises in check. This plan has something in common with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.
However investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.
The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of elite opposition.
The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.
His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.
The opposition aims this position will allow it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.
Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”
Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).
Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries governed by populist leaders compared to similar economies under conventional leadership.
“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.
A further interesting result from the study, however, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.
Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.
But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.
A tech journalist and software developer with over a decade of experience covering AI advancements and cybersecurity trends across Europe.
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