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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the election is over. The president has placed a cap on the peso to control soaring price increases and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.