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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. The president has imposed a limit on the peso to control soaring inflation and currently it is artificially high and foreign reserves are exhausted, leaving the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.