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“Dollars, dollars.” Under the blazing sun, scores of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the currency to tame soaring price increases and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, 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.

Farage has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he lately dropped a promise to make large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.