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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to holding the greenback.

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

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it is overvalued and reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful measures to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.