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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

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

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election concludes. The president has imposed a cap on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to control inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in local polls and a series of graft allegations. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding 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 here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

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 reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.