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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. The president has placed a cap on the peso to control triple-digit price increases and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.