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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the currency to control soaring price increases and now it is artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, 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 corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he recently dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if 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, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.