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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Only massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

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 deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.