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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the peso to tame soaring price increases and now it is overvalued and reserves are depleted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to bring price rises under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing a heavy price.