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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the peso to tame soaring price increases and now it is artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to depict Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” 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.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.