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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering American currency on 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 optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the election is over. The president has imposed a cap on the peso to control soaring inflation and currently it remains overvalued and reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to bring price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

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

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