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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency once the election is over. The president has placed a limit on the currency to tame soaring price increases and now it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Solely large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist leaders than in similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

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 “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.