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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. The president has placed a cap on the currency to tame soaring inflation and now it is artificially high and reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he recently dropped a promise for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray Farage as intending to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists 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 outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.