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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

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

Like her, economists from all backgrounds expect a depreciation of the national currency once the election is over. The president has imposed a cap on the peso to tame soaring price increases and currently it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there 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, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

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