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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the peso to control triple-digit price increases and currently it remains overvalued and reserves are depleted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of planning reckless spending, he lately abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.