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“Dollars, dollars.” Under the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso 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 artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he lately dropped a promise to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

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

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing a heavy price.