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“Cambio, cambio.” Under the blazing sun, scores of currency traders are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency once the election concludes. President Javier Milei has placed a limit on the peso to tame triple-digit inflation and currently it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Solely massive financial intervention from abroad 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 figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell 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 reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers than in comparable countries with more mainstream regimes.

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

Another intriguing finding from the study, however, is despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.