“Exchange, exchange.” Under the blazing sun, scores of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country long used to holding the US dollar.
“The optimal moment to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”
Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.
The nation represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.
Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim command of the economy from the establishment on behalf of the people.
These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.
Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.
But investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.
The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.
Farage has so far committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.
His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.
Labour aims this position will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.
Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”
Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).
A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.
“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.
Another intriguing finding of the research, though, is that 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 plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.
But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.
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