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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has placed a cap on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he lately dropped a promise for large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

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

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for 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 is a conflict there among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.