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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

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

Like her, economists across the spectrum expect a devaluation of the national currency once the election is over. The president has placed a cap on the peso to control soaring price increases and now it is artificially high and reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising forceful measures to wrestle back command 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, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date committed few policies in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow 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 government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.