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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment 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 expect a devaluation of the national currency after the voting is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and currently it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Solely massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed 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 with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.