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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has imposed a cap on the peso to tame soaring inflation and now it is overvalued and reserves are exhausted, leaving the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to control inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

Farage has so far committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.