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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used 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’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the peso to tame triple-digit inflation and now it is artificially high and reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits 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 despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring inflation in check. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and multiple corruption scandals. Only massive economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

Farage has so far committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is 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 their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.