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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has placed a limit on the currency to control soaring inflation and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

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

The opposition aims this stance will allow it to depict Farage as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

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