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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the national currency after the election is over. The president has imposed a limit on the currency to control soaring price increases and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run 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 with populist rule,” argue the researchers.

Another intriguing finding from the study, however, 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 “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.