“Exchange, exchange.” Under the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the greenback.
“The best time for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”
Like her, economists across the spectrum anticipate a devaluation of the national currency once the voting concludes. The president has placed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.
Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.
Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim control of economic management from the establishment on behalf of the people.
These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents 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 price rises under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.
However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.
The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.
The Reform leader to date committed few policies in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.
His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.
The opposition aims this stance will enable it to depict Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.
Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”
Realistically, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).
A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.
“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.
A further interesting result from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.
In other words, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.
But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.
A ceramic artist specializing in sustainable pottery, blending traditional techniques with contemporary aesthetics to create functional art.
