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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country accustomed to holding the greenback.

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

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to tame triple-digit inflation and currently it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.