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“Exchange, exchange.” Under the scorching heat, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency after the voting concludes. President Javier Milei has placed a limit on the peso to control triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of economic management from the establishment on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

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

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.