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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

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

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. The president has placed a limit on the currency to control triple-digit price increases and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise for large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing a heavy price.