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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Only massive economic support by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

Farage has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning reckless spending, he lately dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

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

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

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

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.