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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the greenback.

“The best time for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

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

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring price rises in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Solely massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise on the hoof. He aims 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 tax and spending policies seem unsettled: wary of being accused of planning reckless spending, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review examined the outcomes 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 10% lower in nations governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.