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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election concludes. The president has imposed a limit on the currency to control triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to control price rises under control. The programme has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of graft allegations. Only massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond 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.