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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is now,” says one arbolito, refusing to provide her name. “[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 cap on the currency to control soaring price increases and now it is artificially high and reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, 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 widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.