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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has imposed a limit on the currency to tame soaring price increases and now it is artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of planning reckless spending, he lately dropped a promise for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.