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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in 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’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the voting concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and now it remains overvalued and reserves are exhausted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to reclaim command of the economy 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 styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

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

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But back in 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.