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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are hawking 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 congressional elections in a country long used to holding the greenback.

“The best time to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

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 something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when 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.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.