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

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency once the voting concludes. The president has placed a cap on the currency to tame soaring price increases and now it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing 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 public spending cuts.

Labour hopes this position will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

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

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head 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 typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to 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.