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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.