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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has imposed a limit on the peso to control triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately following a poor performance in local polls and a series of graft allegations. Only massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.