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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency after the voting is over. The president has imposed a cap on the peso to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to control inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.