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“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to saving in the US dollar.

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

Like her, economists from all backgrounds expect a devaluation of the national currency once the voting is over. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful measures to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing reckless spending, he recently abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people 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 is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.