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“Exchange, exchange.” Under the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to holding the greenback.

“The best time for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing 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 ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will allow it to portray the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the performance 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 tends to be 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.