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“Cambio, cambio.” Under the scorching heat, scores of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the election is over. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to bring price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and a series of graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, 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 proposing a Liz Truss-style splurge, he recently abandoned a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

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

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers 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,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.