🔗 Share this article

“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. The president has placed a limit on the currency to control soaring price increases and now it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently the president’s conservative populism.

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

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.