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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the peso to tame soaring price increases and currently it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from the establishment for the benefit of the people.

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

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that 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 is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.