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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to control triple-digit price increases and currently it remains overvalued and reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to bring price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a poor performance in local polls and a series of graft allegations. Only massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this position will allow it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.