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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring 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, no matter the cost.

But investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for planning reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet 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 narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.