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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a lively shopping street 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 greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (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. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid significant costs.