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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election concludes. The president has placed a cap on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. The programme 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.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will allow it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

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

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.