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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the election concludes. The president has placed a cap on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful measures to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

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

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.