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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency after the voting is over. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.