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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

“The optimal moment to buy is currently,” says 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 anticipate a devaluation of the Argentine peso after the election concludes. The president has placed a cap on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring price rises under control. The programme has something in common 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 financial markets started to doubt in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.