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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election is over. The president has placed a cap on the peso to control soaring price increases and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

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

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Solely massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

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