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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to control triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans in writing except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

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

Labour aims this position will enable it to depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.