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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Only massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed 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 a tenth less in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.