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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

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

Like her, economists from all backgrounds expect a depreciation of the Argentine peso after the voting is over. The president has placed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing a heavy price.