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

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

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple 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 figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later 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 populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring 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 (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” 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 retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.