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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to saving in the greenback.

“The best time to buy is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and currently it remains overvalued and foreign reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising muscular policies to reclaim control of the economy from the establishment on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as 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 extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower 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,” contend the researchers.

A further interesting result from the study, though, is that 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 mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.