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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the greenback.

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

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit inflation and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been hit by debt defaults and economic crises 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.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Only massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.