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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand despite elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

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

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.