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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and currently it is artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to bring inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to portray the populist as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to 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 lower taxes and deregulation, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.