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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the voting concludes. The president has placed a cap on the peso to tame soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and a series of graft allegations. Only large-scale 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 some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he recently abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.