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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the peso to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he recently dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.