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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. This plan 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 defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail 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 except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research 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 a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

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

A further interesting result from the study, however, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.