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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the voting is over. President Javier Milei has placed a cap on the peso to control triple-digit price increases and currently it is artificially high and reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to control inflation in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

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

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found 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 erosion of institutions typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.