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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and now it remains overvalued and reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed 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,” contend the researchers.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.