When Donald Trump looks in the mirror does he see Juan Perón smirking back at him? The parallels between Trump and Argentina’s “strong weak man” (or weak strong man) look more uncanny as each week passes.
When Perón came to power, Argentina was the seventh-richest country in the world, home to a dynamic innovative economy, a destination for thousands of European immigrants and very much the country of the future.
Today, Argentina is the 77th-richest country in the world and after 80 years of Perónism the impoverished electorate voted in a radical libertarian, Javier Milei, who promised to reverse two generations of mismanagement and kleptocracy.
Just when Latin America is binning Perónism, Trump’s United States of America appears to be embracing it.
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The US president’s attack on the independence of his country’s central bank follows the same playbook as his stuffing the US Supreme Court with cultural bedfellows; taking key stakes in private companies such as Intel; deploying the national guard on the streets and firing other public servants such as the head of the Bureau of Labor Statistics.
These all point to a multipronged attack on the pillars of US liberal democracy. Flawed as it may be, liberal democracy in the US has been the 20th-century backdrop to the creation of the most dynamic economy the world has seen.
In the 1950s, while the US was building that impressive economy, adhering (mostly) to consensual politics and (reasonably) free markets, Argentina under Perón veered off on a path more informed by Mussolini’s corporatism than Roosevelt’s liberalism.
Perón, a charismatic demagogue, was, like Trump, electorally popular. He was elected president three times and drew support from the Argentinian working class who he promised to protect.
He embraced tariffs, hoping to use the money he earned to build up local Argentinian industries which he felt were suffering from unfair competition. Perón argued that Argentina should have its own strategic industries rather than depend on imports.
At first the government took stakes in these industries, before nationalising them. While the working class loved his strongman rhetoric and his promises to protect them, the rich were kept on board by the idea that lucrative import licences would be doled out to the president’s friends.
Gradually, political opponents were harassed, newspapers muzzled and the central bank, the guardian of Argentina’s originally sophisticated financial system, was nationalised.
Ultimately, the central bank was forced to print money to finance the state’s various projects, sending the currency plummeting, inflation through the roof and the standard of living through the floor.
By the end, Argentina was publishing phoney statistics on a hollowed-out economy with an almost worthless currency.
This happened not overnight but progressively via policies of tariffs, protectionism, nationalisation and censorship. Latin America’s richest nation became poor.
Along that road, there were coups, military juntas, urban terrorism, state execution of opponents, an ongoing cultural and ultimately low-level civil war and the suspension of democracy.
The path back has been extremely difficult, characterised by financial chaos and recurring monetary crises, leading to a libertarian messiah, Milei, who is cutting back the state, privatising across the board, hoping that the economy, which is resource-rich and potentially a regional superpower, will respond.
At this stage the comparison between Argentina and the US – between Trumpism and Perónism – is more instructive than predictive.
However, every move that Trump is making, when seen through the lens of Argentina, smacks of Perónism for the TikTok age.
Whereas Perón milked the adoring crowds with sporadic speeches from the balcony of the Casa Rosada in Buenos Aires, Trump’s approach is designed to immediately inflame or enthuse his base online, with messages reverberating and becoming more powerful in the echo chamber that is social media.
Constant short-term online dopamine hits might be keeping the Maga movement entranced on a daily basis, but the long-term implications of this chaos for the institutional credibility of the US are profound.
Take the issue that has most financial commentators rattled this week: the attempted firing by the president of a Federal Reserve governor, Lisa Cook.
The US president has alleged that she made false statements on two mortgages she took out in 2021. Cook is not resigning and there is now a standoff between the Fed and the State.
Obviously the issue is not about the mortgage documents, but is all about who controls the Federal Reserve, the institution charged with protecting the most important weapon in the US financial armoury: the dollar. Thus far, the head of the Federal Reserve, Jay Powell, has not responded.
This episode is the latest in a battle between Trump and the Fed, which Trump believes is not cutting interest rates quickly enough. It may seem a little arcane, but it is crucial to grasp that the independence of the central bank is an essential underpinning of the US financial system.
All financial systems are based on trust because money is ephemeral. It is not a real thing, but is invented in our heads. Part of the conceit of money is that we all elect to believe in it and its value.
Trust and faith give money its power. Because faith is a social construct, where each one of us having faith emboldens and enlists each other, trust in money and the people who control the amount of money out there is the only thing that holds the system together.
Independent central bankers, for all their faults, are those guardians. Undermine their independence and you undermine the faith in the currency. Trust, like a reputation, is garnered over time, but it can evaporate in an instant.
For generations, the US dollar, the world’s reserve currency, has benefited from the strength and credibility of US institutions, those institutions grounded in liberal democracy and the rule of law, where public servants can’t be fired and replaced at the whim of the president.
What we are seeing with the Lisa Cook case is the thin edge of the wedge. What is at stake is the professionalism of the Federal Reserve. If the US president can fire someone he does not like and replace her with a patsy then in time the institution will corrode.
Trump wants interest rates to be lower, but if rates are forced lower and inflation remains high then the currency will slide. A sliding currency can be a self-reinforcing dynamic.
As the US is dependent on the money of others to cover its current account deficit, a falling currency might lead to panic. As the dollar is the reserve currency, a panic in Washington DC will have untold consequences throughout the global system.
At least in Argentina Perónism only affected the local; White House Perónism propagated by Trump could affect us all.
