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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. The president has imposed a limit on the currency to control triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.