🔗 Share this article

“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election is over. The president has placed a cap on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.