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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the voting is over. The president has placed a limit on the peso to tame triple-digit inflation and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

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

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.