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“Cambio, cambio.” Under the blazing sun, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country long used to holding the greenback.

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

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to bring inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad 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 figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, 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 with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.