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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the election concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.