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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the voting is over. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes 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 approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.