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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a limit on the peso to control triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim control of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail 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 large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.