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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the greenback.

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

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the voting concludes. The president has imposed a limit on the peso to tame triple-digit price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, 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 is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.