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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency 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 nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a cap on the currency to control soaring price increases and now it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are also seen in 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 public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to control inflation under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Solely massive economic support by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.