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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to holding the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

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

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

Farage has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

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

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.