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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has imposed a limit on the peso to control soaring price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

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 “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.