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“Dollars, dollars.” Under the blazing sun, dozens of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage to date committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning reckless spending, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as intending to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded 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 explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.