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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only massive economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

Recent research 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 countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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