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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. The president has imposed a cap on the currency to tame soaring inflation and currently it is overvalued and reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronism, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to control price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.