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“Exchange, exchange.” Under the scorching heat, 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 October 26 midterm elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the election is over. The president has placed a cap on the peso to control triple-digit inflation and currently it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.