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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. President Javier Milei has imposed a cap on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although 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 typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers than in 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.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing a heavy price.