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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to tame soaring price increases and now it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back 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, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda in recent months after a poor performance in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

Farage has so far committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will allow it to portray the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the researchers.

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

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

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