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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the US dollar.

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

Like her, economic experts across the spectrum expect a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the currency to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of graft allegations. Only massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.