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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the peso to tame soaring inflation and now it remains overvalued and reserves are exhausted, causing the national economy sluggish as buyers turn to 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 influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he recently abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.