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

“The best time to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring inflation and currently it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to reclaim command of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a promise to make large tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.