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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has placed a limit on the peso to control soaring inflation and currently it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

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