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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation accustomed to holding the US dollar.

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

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has imposed a cap on the peso to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises 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, unconventional, promising muscular measures to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises 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, after 15 years, GDP per capita is often a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.