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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

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

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to control triple-digit price increases and currently it remains artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Only massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting 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. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.