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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a cap on the peso to tame triple-digit price increases and currently it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

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

Labour aims this position will enable it to portray Farage as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.