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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to tame soaring price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

But 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 financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.