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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a poor performance in local polls and a series of corruption scandals. Solely massive economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.