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“Exchange, exchange.” Under the blazing sun, scores of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The best time to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it remains overvalued and reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping 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 similarly viewed inflation as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid significant costs.