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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency once the election concludes. The president has placed a cap on the currency to control triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises 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 rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, 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 extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.