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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the US dollar.

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

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a shaky result 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.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

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

Recent research from a leading journal analysed the performance of dozens of populist leaders, 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 governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

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