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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly 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 imposed a limit on the currency to control soaring inflation and now it is artificially high and reserves are depleted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

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 averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he lately dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.