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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit price increases and currently it is artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately following a shaky result in provincial elections and a series of graft allegations. Solely massive economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a promise to make large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.