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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol 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 Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

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

A further interesting result of the research, 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 four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.