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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a cap on the peso to control triple-digit price increases and currently it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

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

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in 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.