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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to tame soaring inflation and now it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to bring inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months after a poor performance in local polls and multiple 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 some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.