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

“The best time to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the election concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and currently it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a shaky result in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing reckless spending, he recently dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

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

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and reduced rules, 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 rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.