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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the greenback.

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

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has placed a limit on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of elite opposition.

Farage has so far committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined 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 tends to be a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals 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 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 in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.