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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. The president has placed a cap on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

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

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. 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 through foreign assistance, Argentina’s citizens have already paid significant costs.