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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the voting is over. The president has placed a limit on the currency to control soaring price increases and now it remains overvalued and reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to control price rises under control. 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, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. 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 the populist package.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

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

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.