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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling US dollars along 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 country accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the currency to control soaring inflation and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back command of economic management from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. 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 tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to bring back 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 in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid significant costs.