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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively 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 to buy is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. The president has imposed a limit on the currency to tame soaring inflation and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise 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 similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention 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 about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to portray Farage as planning to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.