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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a country long used to saving in the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the election is over. President Javier Milei has imposed a limit on the currency to control triple-digit inflation and now it remains artificially high and reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim control of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour aims this position will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.