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“Exchange, exchange.” Under the blazing sun, scores of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election is over. The president has placed a limit on the currency to tame triple-digit inflation and currently it is artificially high and foreign reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims 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 in flux: wary of being accused of proposing reckless spending, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.