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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country long used to holding the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim command of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of being accused of proposing reckless spending, he recently dropped a promise for large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

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