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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the peso to control triple-digit price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

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

These defining traits are shared by his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.