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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the election concludes. The president has imposed a cap on the peso to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

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

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.