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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has imposed a limit on the peso to tame soaring price increases and now it remains artificially high and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back command of the economy from the establishment on behalf of the people.

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

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation under control. The programme shares similarities 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.

However investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

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

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders than in similar economies under conventional leadership.

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

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.