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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is currently,” says 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 national currency once the election is over. The president has placed a limit on the peso to control soaring inflation and now it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.