Washington, DC, August 20, 2019 --  

The specter of populism is once gain haunting Argentina. Without action, it will continue haunting America, too.

When a leftist challenger defeated Argentina's liberal president Mauricio Maci in first round elections last week, markets didn't like it one bit. The next day, the country's stock market fell by 35 percent and the country's peso lost a quarter of its value against the U.S. Dollar.¹ The election will be decided in a second round of voting next month.

Argentines with money fear a return to the crazy left-wing populist policies of previous president Cristina Fernández de Kirchner. Indeed she is now the running mate of his challenger. During her administration, the government defaulted on its debt, then fought inflation not with fiscal tools, but simply by outlawing price increases. And when that didn't work, they replaced professional statisticians with cronies willing to lie about the real inflation rate, and jailed anybody who reported otherwise.

It's no wonder that markets hate her, but that doesn't stop many of the impoverished masses from backing her ticket, led by Alberto Fernández. To them, irresponsible spending, corruption and cooking the books is better than the painful liberal austerity of the current government. The fact that the wealthy are terrified is seen as an added bonus.

This kind of thinking is much more familiar to Americans than the last time Argentina had an election. Like Kirchner, President Trump is no fan of the establishment or economic orthodoxy. He has threatened to fire the independent Chairman of the Federal Reserve — an act that might make Kirchner give Trump a fist-bump at a future summit. And like Kirchner, Trump is hated by the elites, and feeds off this hatred to whip up support from his base.

While most economists probably think voting for populists like Kirchner or Trump is a bad idea, it isn't economists who decide elections — it's the voters. Enough people in both countries feel like they have been left behind to want to stick it to those who are doing well. There is no way that high-falutin' arguments about economic theory are going to sway these people — their votes are based on not reason but emotion.

Old-fashioned coalition building and turnout efforts might prove temporarily effective, but could prove fleeting. Those who think Donald Trump is an aberration to be destroyed once and for all in 2020 should take note of Kirchner's potential return to power in Argentina after only four years in opposition.

If populist arguments are to be defeated long-term in either country, then mainstream politicians must convince a majority of voters that they are both part of the establishment, and have a future in that establishment. Writing off the angry masses as a bunch of racist losers (the United States) or a bunch of government parasites (Argentina) will do little to change the minds of the disaffected. It is a recipe for inciting their wrath to electoral defeat.

Those who think this way and end up on the losing end risk souring on democracy. That's exactly what happened to elites in Egypt in 2013, when faced with populist incompetent elected from the Muslim Brotherhood. Middle and upper class Egyptians demonstrated in the streets until the military gleefully intervened. Egyptian elites are now safe from the stupid choices of the impoverished masses, but must suffer official corruption and repression at the whim of their dictator. And of course, they no longer have any official recourse. Ever.

Few in either the United States or Argentina would argue for the Egyptian solution to destructive populism. Rather than abandoning democracy, American and Argentine elites are more likely to suggest abandoning their country in favor of a more enlightened locale. That is similarly foolish. The populist grip has taken hold on Britain, Austria, Italy, Poland, Hungary, Turkey, Russia, and many other smaller countries around the world. There's no telling where the disease will spread next.

Rather than abandoning our own democracies when populists get elected, we must be willing to do the hard work of embracing the angry masses and bringing them back to the table. Only by maintaining a society that is inclusive of the masses can democracy hope to survive.

Related Web Coumns:

Pitiful Subjects, November 29, 2016

Notes:

1. CNBC, Argentina's Election Surprise Triggers Historic Stock Market and Currency Crash, August 12, 2019