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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the US dollar.

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

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. The president has imposed a limit on the currency to control triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

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

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Only massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning reckless spending, he lately dropped a pledge for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

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 deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise 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, the Argentine people are already bearing a heavy price.