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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and now it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning reckless spending, he lately abandoned a promise for significant tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.