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“Cambio, cambio.” Under the scorching heat, dozens of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency once the voting is over. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and currently it is overvalued and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

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

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray Farage as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain 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 reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.