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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has imposed a limit on the peso to tame triple-digit inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.