🔗 Share this article

“Exchange, exchange.” Under the blazing sun, dozens of currency traders are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the voting concludes. The president has placed a limit on the currency to control triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a poor performance in local polls and a series of corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.