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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to tame soaring price increases and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.