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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the election is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Only massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this position will allow it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.