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“Dollars, dollars.” Under the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the greenback.

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

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the election is over. The president has placed a limit on the peso to tame soaring price increases and currently it is artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented 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, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement public demand in the face of elite opposition.

The Reform leader has so far committed few policies to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

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

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.