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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is currently,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency after the voting is over. President Javier Milei has imposed a cap on the currency to tame triple-digit price increases and currently it is artificially high and 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 debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a poor performance in local polls and a series of graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away 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 aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances 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 narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.