🔗 Share this article

“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the election is over. The president has imposed a cap on the peso to tame soaring inflation and now it is artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage to date committed few policies in writing aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

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

In other words, it remains uncertain that even when their policies fail, such leaders 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, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.