🔗 Share this article Do Populist Administrations Inevitably Wreck the Economy? “Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to holding the US dollar. “The best time for purchasing is currently,” says a arbolito, refusing to provide 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 depreciation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to control triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods. Ideal Conditions Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version. Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back command of economic management from traditional elites for the benefit of the people. These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker. Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences. However investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major monetary collapse. Contradictions The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror. The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package. His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure. Labour hopes this position will allow it to depict the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment. Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.” Holding on to Power Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique). Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes. “Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers. A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents. Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics. Yet back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.