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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a limit on the currency to control triple-digit inflation and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he lately dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.