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“Cambio, cambio.” Under the blazing sun, scores of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the currency to control triple-digit price increases and currently it is artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to bring price rises under control. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact public demand despite elite opposition.

Farage to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to depict the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

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

A further interesting result of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.