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“Cambio, cambio.” Under the scorching heat, dozens of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

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

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a cap on the currency to control soaring inflation and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

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, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in 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.