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

“The optimal moment to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring price increases and currently it remains artificially high and reserves are exhausted, causing the national economy sluggish as consumers opt for 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 susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a shaky result in local polls and a series of graft allegations. Only large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He wants 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 fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he recently dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

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

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.