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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has placed a limit on the currency to tame triple-digit inflation and now it is overvalued and reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.