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“Dollars, dollars.” Under the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip 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 optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has placed a cap on the currency to tame triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits 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 former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.