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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the currency to control soaring price increases and currently it remains overvalued and reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, 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, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.