🔗 Share this article

“Cambio, cambio.” Under the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. The president has imposed a limit on the peso to control triple-digit inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to control inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large 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 depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.