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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to holding the US dollar.

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

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he lately abandoned a promise to make large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in nations run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.