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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of being accused of planning reckless spending, he recently dropped a promise 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 position will enable it to portray the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past 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 a heavy price.