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“Exchange, exchange.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency after the election concludes. President Javier Milei has placed a limit on the currency to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing 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 economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising forceful measures to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of graft allegations. Solely massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.