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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the greenback.

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

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices 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 local polls and multiple corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although 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. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.