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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to tame soaring price increases and now it remains artificially high and reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back command of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – 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 dragon to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

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

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.