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“Cambio, cambio.” Under the blazing sun, dozens of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to saving in the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. The president has placed a limit on the peso to control triple-digit inflation and now it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These key characteristics are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he lately dropped a promise for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures 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 plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.