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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency after the election concludes. The president has imposed a cap on the currency to control soaring inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

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

A further interesting result of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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