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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling American currency along 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 saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme 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 began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.