“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a lively 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 US dollar.
“The best time to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”
Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election concludes. The president has placed a cap on the currency to control triple-digit inflation and now it remains overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for cheap imports.
Argentina is a very special case. Argentina has frequently been racked 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 the president’s conservative populism.
The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.
These key characteristics are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.
Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to control inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.
However investors started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Solely massive economic support by the US has averted what looked set to become a major monetary collapse.
The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.
Farage to date outlined limited plans to paper aside from a call for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.
His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.
The opposition aims this stance will allow it to depict Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.
An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”
In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises something unique).
Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations run by populist rulers than in comparable countries with more mainstream regimes.
“Financial decline, weakening economic fundamentals 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, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.
In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.
But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing a heavy price.
Elena Hartwell is a multidisciplinary artist and educator passionate about fostering creative communities in London.