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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a cap on the currency to tame soaring price increases and now it is artificially high and reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, 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 even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.