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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and currently it is overvalued and reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to control price rises under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he recently dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, 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 rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, 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 four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.