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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a shaky result in local polls and a series of graft allegations. Only massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

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

Another intriguing finding of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.