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“Cambio, cambio.” Under the blazing sun, scores of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the election is over. President Javier Milei has placed a cap on the peso to control soaring price increases and now it is artificially high and reserves are exhausted, causing the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only massive economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.