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“Cambio, cambio.” Under the blazing sun, scores of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting is over. The president has imposed a limit on the currency to control soaring price increases and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, 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 have already paid significant costs.