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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The best time to buy is now,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to control inflation in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he recently dropped a promise for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

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

An economics professor says there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.