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“Dollars, dollars.” Under the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency once the voting concludes. The president has placed a cap on the currency to control triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring price rises in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for planning reckless spending, he lately dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray Farage as planning to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But 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.