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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

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 shared by his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Only large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he recently dropped a promise to make large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises distinct solutions).

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 that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.