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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the greenback.

“The best time to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency after the election concludes. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence 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 averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.