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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the peso to control soaring price increases and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been 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 Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he recently dropped a promise to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders than in similar economies under conventional leadership.

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

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

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