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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning reckless spending, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average 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 at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.