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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the election concludes. The president has placed a limit on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

Farage to date outlined limited plans in writing aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

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

Another intriguing finding of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.