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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to control soaring inflation and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful measures to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

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

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

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.