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“Dollars, dollars.” Under the scorching heat, scores of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says 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 talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal 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 are already bearing significant costs.