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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the peso to tame soaring inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as planning to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.