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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the currency to control soaring inflation and currently it is artificially high and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control price rises in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, perhaps even 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 in flux: wary of being accused of planning reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, 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 governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.