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“Cambio, cambio.” Under the scorching heat, scores of currency traders are selling US dollars on Florida Street, a lively pedestrian strip 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,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency after the election concludes. President Javier Milei has imposed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular measures to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control inflation under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray Farage as intending to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies with more mainstream regimes.

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

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.