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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the national currency after the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who styles 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 – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

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

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.