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“Dollars, dollars.” Under the blazing sun, scores of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the election is over. The president has imposed a limit on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim control of economic management from the establishment 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 people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a shaky result 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 major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he recently abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.