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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting is over. The president has imposed a cap on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, 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.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control inflation under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed 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 tends to be a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.