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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to tame soaring price increases and now it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage to date outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will allow 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 increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

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 a heavy price.