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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country long used to holding the US dollar.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as intending to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking 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 real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.