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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking 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 midterm elections in a country accustomed to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election is over. The president has imposed a limit on the currency to control soaring price increases and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he lately dropped a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.