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“Dollars, dollars.” Under the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the national currency after the election is over. President Javier Milei has imposed a cap on the peso to tame soaring inflation and currently it is artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point 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 is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

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