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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately dropped a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.