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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment 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.”

Similar to her, economists from all backgrounds expect a depreciation of the national currency after the voting concludes. The president has placed a cap on the currency to tame triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

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

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But back in 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 a heavy price.