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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the election concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

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

Labour hopes this stance will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.