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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the US dollar.

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

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the election concludes. The president has placed a limit on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to bring inflation in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says 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 grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries governed by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.