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“Dollars, dollars.” Beneath the blazing sun, dozens 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 ahead of the October 26 midterm elections in a country long used to saving in the US dollar.

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

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the currency to control soaring price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of corruption scandals. Only massive economic support by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he recently dropped a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes 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 nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.