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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and currently it remains overvalued and reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

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

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.