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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a cap on the peso to tame soaring inflation and now it remains overvalued and reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been 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 currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand despite elite opposition.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence 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 from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.