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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

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

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, 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 severe budget reductions – had earned praise from the IMF for contributing to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, 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 attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.