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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the election is over. President Javier Milei has placed a cap on the currency to control triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries run by populist rulers compared to comparable countries with more mainstream regimes.

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

Another intriguing finding of the research, though, is even with their negative impacts, 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 is not clear whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.