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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

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

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency 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 depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

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

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.