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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to control soaring price increases and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and multiple graft allegations. Only large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed 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 tends to be a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.