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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

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

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it remains artificially high and reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.