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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

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

Like her, economists from all backgrounds expect a depreciation of the national currency after the election is over. The president has placed a limit on the peso to control soaring price increases and currently it is artificially high and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed 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 erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.