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“Dollars, dollars.” Beneath the blazing sun, 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 before the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the influential Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.