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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers 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 26 October congressional elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a limit on the currency to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control price rises in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.