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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has placed a cap on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – 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, as it stands. “The party are bankrolled by affluent backers calling for 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 here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” contend the researchers.

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

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.