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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time to buy is now,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to control soaring price increases and now it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing reckless spending, he recently abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.