🔗 Share this article

“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has placed a cap on the peso to tame soaring price increases and currently it is artificially high and reserves are exhausted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim command of economic management from the establishment for the benefit of the people.

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

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.