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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and now it remains overvalued and reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling 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 international lenders for contributing to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Only massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement the “will of the people” despite 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 wants to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.