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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has imposed a limit on the peso to tame triple-digit inflation and now it is overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to bring price rises under control. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence 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 performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

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

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, 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 at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.