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“Exchange, exchange.” Under the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting concludes. President Javier Milei has placed a limit on the currency to control soaring inflation and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed 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 aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he lately dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

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

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.