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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

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

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, 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 face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond 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, Argentina’s citizens are already bearing a heavy price.