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“Dollars, dollars.” Under the scorching heat, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the voting concludes. The president has placed a limit on the peso to tame soaring price increases and currently it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to control price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive economic support from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

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

Farage to date outlined limited plans to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

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