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

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and currently it is artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, 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 – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he lately dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will allow it to depict the populist as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although 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. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

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

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

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

Yet 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.