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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to control soaring price increases and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be 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 despite elite opposition.

The Reform leader to date committed few policies to paper aside from a call 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 fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with 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 appeal reaches beyond everyday financial matters.

Yet returning to 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.