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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the peso to control triple-digit inflation and currently it remains overvalued and reserves are exhausted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise for large tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader 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 typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

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

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.