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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to holding the greenback.

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

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election is over. The president has placed a cap on the peso to tame triple-digit inflation and now it is overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who presents himself as a pint-swilling 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 severe budget reductions – had won plaudits from the IMF for contributing to control price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage to date committed few policies in writing except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price 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 fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.