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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting is over. The president has imposed a limit on the currency to tame triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust 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 a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

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

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

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 regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.