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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the currency to tame triple-digit inflation and currently it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.