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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit inflation and currently it remains overvalued and reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he lately dropped a promise for large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here among rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.