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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the peso to tame soaring price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in 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 privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Only massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. 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 collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.