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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the peso to control soaring inflation and now it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Solely massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.