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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency after the election concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

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

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises 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, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

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

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.