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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the currency to tame soaring price increases and now it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to control inflation under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, 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 collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.