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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to tame soaring price increases and now it remains artificially high and reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.