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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are selling US dollars 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 US dollar.

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

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and now it is overvalued and reserves are exhausted, leaving 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 hit by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by 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.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and a series of graft allegations. Only massive financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

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

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.