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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the greenback.

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

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the peso to control soaring inflation and now it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: wary of being accused of planning reckless spending, he lately abandoned a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.