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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to saving in the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency once the election is over. The president has imposed a limit on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally 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.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

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