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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known 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,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. The president has placed a cap on the currency to tame soaring inflation and currently it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

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

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple graft allegations. Only massive economic support from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

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 “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.