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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the voting concludes. The president has imposed a limit on the currency to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including 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 the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning reckless spending, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations governed 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 under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.