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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to control inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a shaky result in local polls and a series of graft allegations. Solely massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he lately abandoned a promise for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

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, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, versus four 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 appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.