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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the US dollar.

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

Like her, economists across the spectrum anticipate a devaluation of the national currency after the voting concludes. The president has placed a cap on the peso to control soaring inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to control price rises in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.