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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has imposed a cap on the currency to tame triple-digit inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve 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 a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for large tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.