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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the currency to control triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax reductions. His second-in-command, Richard Tice, 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 made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.