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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to tame soaring inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising muscular measures to reclaim command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning reckless spending, he lately dropped a promise for large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.