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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the currency to tame triple-digit inflation and currently it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will allow it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

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