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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including 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 the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.