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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and now it is artificially high and reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to control price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a promise to make large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.