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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is 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 inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.