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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back command of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations 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 Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in countries run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.